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Business Barometers 

used in the 

Management of Business 

and 

Investment of Money 

A Text Book on Applied Economics 
for Merchants, Bankers 
and Investors 

“’A 

Roger W. Babson 


(SIXTEENTH EDITION) 
Issued November, 1923 


Published by 

BABSON PARK CO. 

Wellesley Hills, Mass., U. S. A. 




First Edition Copyrighted 1909 
Second Edition Copyrighted 1910 
Third Edition Copyrighted 1910 
Fourth Edition Copyrighted 1911 - 
Fifth Edition Copyrighted 1912 
Sixth Edition Copyrighted 1913 
Seventh Edition Copyrighted 1914 
Eighth Edition Copyrighted 1915 
Ninth Edition Copyrighted 1916 
Tenth Edition Copyrighted 1917 
Eleventh Edition Copyrighted 1918 
Twelfth Edition Copyrighted 1919 
Thirteenth Edition Copyrighted 1920 
Fourteenth Edition Copyrighted 1920 
Fifteenth Edition Copyrighted 1921 
Sixteenth Edition Copyrighted 1923 
by 

Roger W. Babson 



Printed in the United States of America 

© Cl A7 66023 

JAN 21 *24 


©ebtcaleb 

to 

GEORGE FILMORE SWAIN 

Professor of Civil Engineering 
Harvard University 


“ People will endeavor to forecast the future and make 
agreements according to their .prophecy. Speculation of this 
kind by competent men is self-adjustment of society to the 
probability.” —Judge Holmes in a United States Supreme 
Court decision. 



“I hold that a man who is long headed, who foresees 
and judges accurately, has an advantage ,over his 
neighbor, and it is not accounted immoral for him to 
use that advantage, because he is individually better 
fitted for the business; and it inheres in him by a law 
of nature, that he has a right to the whole of himself 
legitimately applied. If one man, or twenty men, 
looking at the state of the nation here, at the crops, 
aVthe possible contingencies and risks of climate, at 
the conditions of Europe; in other words, taking all 
the elements that belong to the world, into consider¬ 
ation, are sagacious enough to prophesy the best of 
action, I don’t see why it is not legitimate.” 

Henry Ward Beecher. 


TABLE OF CONTENTS 


CHAPTER I. 

Two Clares of Statistics. 

CHAPTER II. 


Page 

13 


Range of Stock Market Since 1860, Showing the Possi¬ 
bilities of Profit to an Investor. 33 


CHAPTER III. 

Range of Commodity Market Since I860, Showing the 

Possibilities of Profit to a Merchant . 82 


CHAPTER IV. 

Law of Equal and Opposite Reaction, Theory of the 

Babsonchart.104 


CHAPTER V. 

Conditions and Events Since 1860 . 144 

CHAPTER VI. 

Subjects Relating Especially to Mercantile Conditions 229 
CHAPTER VII. 

Subjects Relating Especially to Monetary Conditions 269 
CHAPTER VIII. 

Subjects Relating Especially to Investment Conditions 370 
CHAPTER IX. 


A Talk on Coppers.422 

APPENDIX. 

Effect of War on Business Conditions.444 


CHARTS. 

1. Chart Showing the Range of the Commodity M arket 

Since 1860 82 

2. Chart of Prices of Stocks and Commodities Since 

the Civil War. 99 

3. Babsonchart Based on Twelve Leading Subjects 108 

4. Comparison of Main Features of Seven Panics . 140 

5. Half a Century of Business Statistics.222 

6. Chart of Strikes Since 1915. 264 

7. Chart of Course of Money Following Four Great 

Panics.292 

8. Chart of Federal Reserve Banking System . . . 308 

9. Course of Stock Market in Four Panics.316 

10. Chart Showing the Range of the Stock Market 


11. Commodity Prices in the Napoleonic War . . . 444 

















FOREWORD 


“A study of past disturbances leads to the convic¬ 
tion that no severe depression has occurred which was 
not preceded by loud warnings. These warnings 
ought not to pass unheeded, and in order to recognize 
them promptly it is necessary that accurate statistics 
be furnished. Much improvement has beexi accom¬ 
plished in the last few years, though it is to be regretted 
that so much of our statistical information is fragmen¬ 
tary or inaccurate. Official and private publications 
furnish much valuable information. They include 
voluminous figures of deposits and loans of banks, 
movement of specie, exports and imports, railway 
earnings, wholesale prices, and the condition and 
probable yield of crops. A vital defect in many of 
them is the omission to give, for purposes of compari¬ 
son, similar figures for previous months and years. 
Another defect is the absence of uniformity in the 
methods and classification employed. These com¬ 
parative statistics would afford a means of determining 
the trend of events, and give warning when prices are 
unnaturally high or any branch of business is over¬ 
done. It is also noteworthy that we do not sufficiently 
consider statistics relating to the course of affairs in 
foreign countries, the influence of which upon our 
own condition is of the utmost importance, by reason 
of the enlargement of our trade and the closer interna¬ 
tional relations of modern commerce. Other statistics, 
which are inadequate or lacking and which would be 
of great value, are those pertaining to the employment 


of labor, capital invested in new enterprises, amounts 
expended in new construction, volume of production 
in the various kinds of manufactures, and statistics 
of state banks and savings institutions similar to 
those pertaining to national banks. After making 
due allowance for the insufficiency of statistics, it 
must be said that the failure to pay sufficient attention 
to those already available is equally to be regretted.' r 

The above was written in 1902 by Hon. Theodore 
E. Burton, U. S. Senator from Ohio, and is very 
interesting as a matter of prophecy. The “ vital 
defects ” mentioned have, however, now been over¬ 
come, and the office of the author of this book has 
obtained and is now able to furnish regularly the 
identical figures which Senator Burton then so 
much desired. 








































































' 


















































































































































































PREFACE 

(Fundamental Principles which readers of this book should 
always keep in mind.) 

N EITHER this book nor any other can aid a 
banker, merchant, or investor to become 
rich within a short time. Nobody knows 
nor can know what conditions or prices are to exist 
within a few weeks, or even months, and 95% of 
the men who endeavor to take advantage of these 
monthly movements — or even who worry about 
them — never make much headway. 

Great fortunes which have been created by 
bankers, merchants, and investors are the result 
of ignoring these monthly fluctuations in com¬ 
modity and security prices, and of striving to an¬ 
ticipate and profit by the major movements coming 
every few years. These major movements can he 
foretold if one will spend the necessary time and 
money in studying fundamental conditions. There¬ 
fore a fortune is within the grasp of every reader of 
this hook who has and uses the necessary figures. 
There are, however, two requisites: 

1. One must develop self-control, both to refrain 
from attempting to profit by the monthly fluctua¬ 
tions, which 95% of the people endeavor to follow, 
and to act quickly and take advantage of the major 
movements, which 95% of the people fail to profit 
by, either because they are infatuated with pros¬ 
perity or scared by panic or depression. 

2. One must develop patience, and remember 
that it takes years to build up a fortune in this way; 


that it is an especially slow process at first, so that 
what we spend for obtaining the data the first few 
years may seem large during these early years. 
The expense, however, is infinitesimal compared 
with the value. In truth, it is due to the fact that 
most people ignore these figures, that 90% of our 
business men are said to “ fail.” 

Some ask: “ Are not students of fundamental 
conditions working to their own disadvantage in 
urging others to unite in this work? ” My answer 
is “Theoretically — yes.” On the other hand, every 
honest preacher, physician, lawyer, teacher, judge, 
and soldier who is truly serving his function in the 
community must strive to eliminate the trouble, 
upon the existence of which he is dependent for a 
livelihood. But, until the world no longer needs 
preachers, physicians, lawyers, judges, soldiers, 
there will be periods of overexpansion and depres¬ 
sion when commodities and securities will rise and 
decline in price. We who study fundamental condi¬ 
tions and act in accordance with what they teach, will 
both perform a distinct service to our country and 
slowly but surely create for our institutions and our¬ 
selves huge fortunes. 

The writer of this book wishes to acknowledge 
the aid which he has received from many friends in 
this country and abroad. He wishes also to thank 
his efficient corps of assistants who have aided 
greatly in the compilation, and commends the 
various books, papers, and periodicals which he 
has quoted from or used in other ways. 

He also wishes again to thank his many friends 
in the various stock exchange firms, bond houses, 


and banks who have been patient during the experi¬ 
mental and formulative stages of this work. These 
friends have not only recognized the difficulties 
under which the work has been performed, but 
have always aided greatly by criticisms and sug¬ 
gestions. May the writer never abuse this friend¬ 
ship! 

R. W. B. 


Wellesley Hills, Mass., November, 1923. 
























CHAPTER I 

TWO CLASSES OF STATISTICS 


S TATISTICS are divided into two classes, viz.: 
Comparative Statistics and Fundamental 
Statistics; and the following gives a short 
description of these two classes: 

(1) Comparative Statistics 

So far as the merchant is concerned, comparative 
statistics relate to the weight, quality, age, and 
method of manufacture of the merchandise in which 
he deals, together with such “ trade figures ” as are 
published in the trade journals. 

From the investor’s point of view, comparative 
statistics include all particulars concerning the 
bonded debt, the earnings, and the general physical 
and financial condition of properties. Such statis¬ 
tics are very necessary to bankers and investors for 
comparing similar securities of different companies, 
or different securities of the same company. If 
such data are always up to date, such comparative 
statistics are very valuable for enabling one to se¬ 
lect safe securities, either for permanent investment 
or for buying and selling again. As the largest and 
most successful stock exchange brokers, bond 
houses, and mercantile firms are already well sup¬ 
plied with comparative statistics, and, so far as 
they are useful, are obtaining excellent results from 


14 


BUSINESS BAROMETERS 


them, we shall not here discuss details concerning 
this class. It should be clearly understood, how¬ 
ever, that such statistics are worthless for deter¬ 
mining the general course of the entire market. 

Comparative statistics determine only actual 
values, enabling one to select safe securities or good 
merchandise, or to select the better of two or more 
companies’ securities or grades of merchandise. 
With the general market conditions remaining 
fixed, comparative statistics might be used for 
forecasting a rise or a decide; but the general 
market is so seldom stable, that comparative sta¬ 
tistics cannot be depended upon to serve this 
purpose. It is this fact, that they are inadequate 
for analyzing general conditions, that has brought 
comparative statistics into ill repute. The market 
value of securities or merchandise may continually 
decline, and the intrinsic value of the same in¬ 
crease, or vice versa. 

Whoever bases either purchases or sales upon 
earnings, physical conditions, or other comparative 
statistics alone with the idea of selling at a profit , 
usually loses money. Note the phrase, “With the 
idea of selling at a profit.” Such statistics may be 
used for selecting a safe investment or good mer¬ 
chandise, such as one may desire to hold perma¬ 
nently or for a very long while; but they are 
absolutely worthless for the “ turns.” It is because 
this fact is not being recognized by many firms, 
content with accumulating only comparative sta¬ 
tistics, that even with their elaborate statistical 
departments they are often on the losing side. In 


TWO CLASSES OF STATISTICS 


15 


short, comparative statistics treat only of surface 
conditions. 

(2) Fundamental Statistics 

Fundamental statistics relate to underlying con¬ 
ditions of the country and make it possible to 
analyze demand, supply, money conditions, etc. 
Fundamental statistics, although now used by 
only the most careful investors and merchants, are 
by far the most necessary and profitable. 

It is the purpose of this hook to show the impor¬ 
tance of considering underlying and fundamental 
conditions before buying or selling securities or mer¬ 
chandise. 

The idea that we must have periods of over¬ 
expansion and depression every few years is entirely 
untrue. In this sense there is no such thing as a 
business “ cycle.” 

There is no circle of events through which busi¬ 
ness absolutely must pass. The trend of business 
depends upon what people do. When the majority 
try to get more than they give, over-expansion 
results, and this in turn demands contraction and 
readjustment. If there had been no over-expan¬ 
sion there would have been no need of readjust¬ 
ment. The way to prevent business depressions is 
to keep business at an average rate of prosperity — 
in other words, prevent the inflation and over¬ 
expansion which make depressions necessary. 

The welfare of any nation depends upon the de¬ 
velopment of its resources and the efficiency of 
distribution. As these two factors are increased 


16 


BUSINESS BAROMETERS 


the people of that country can have more pros¬ 
perity,— that is, they can have more of the com¬ 
forts they desire. This is the only way in which 
the real welfare of any people can be improved,— 
by producing more goods and distributing them 
with less waste. When you look back over our 
business history, you see a continuous series of 
fluctuations. We have had periods of intense 
activity, high prices, speculation and borrowing, 
followed by periods of depression, falling prices, 
and failures. The first we called “ boom times 
the latter “ hard times.” In reality, however, the 
“ boom times ” were only an effort to borrow from 
the future — to have more luxuries than the de¬ 
velopment of our resources warranted. The “ hard 
times ” were the natural reaction, during which we 
paid up for our excesses. 

Consequently past financial history has con¬ 
sisted of distinct movements, and, although of 
different durations, each movement has consisted 
of four periods, namely: 

1. A Period of Over-expansion 

2. A Period of Decline 

3. A Period of Depression 

4. A Period of Improvement 

Moreover, the laws of nature, commerce, and in¬ 
dustry determine that these movements shall al¬ 
ways consist of four different periods . The idea 
that reckless over-expansion can ever become per¬ 
manent and will not be followed by a business 
depression is false. The idea that there can be an 


TWO CLASSES OF STATISTICS 


17 


unlimited period of depression without succeeding 
general activity and high market prices, is likewise 
a mistaken notion. 

It, however, should be remembered that there 
are major swings of about twenty years’ duration, 
and also minor movements of about three to five 
years’ duration. 

Theoretically, there should be a state where 
everybody is prosperous and nobody overtrades, 
where the cost of living is reasonable, and the wage- 
earner has a margin to save for old age or establish 
a higher standard of comfort. Yet it is true that 
we have never so far seen a condition so equable. 

The record of crises and booms can be carried 
back beyond the history of this country. We can 
start from the opening years of the eighteenth cen¬ 
tury, when William of Orange was on the English 
throne. We can trace therefrom a complete rota¬ 
tion once in five to twenty years, and we can carry 
it into the last century with conditions exactly re¬ 
flected on this side of the Atlantic. A condition 
of equilibrium is apparently the most difficult of all 
for the world’s trade to maintain. 

“ Business may be quietly good, but that ambi¬ 
tion to which we probably owe also the greater part 
of the world’s progress insists upon forcing it be¬ 
yond reasonable capacity. The result is always 
the same. The result of years of saving is over- 
confidence, inflation, waste, conversion of floating 
wealth into fixed wealth, and, finally, collapse and 
panic. Here is the plain evidence of two hundred 
years, and it may be assumed at no risk that it is 


18 


BUSINESS BAROMETERS 


the evidence of all commercial systems. Joseph 
with his seven fat years and his seven lean years 
expressed nothing more. 

“ What is not so readily realized is that a panic 
is followed by rapid recovery in stock prices, and 
one slower but still relatively quick in general 
business. This again is followed by an arrest in 
business, where, contrary to assumptions just as 
hasty and ill balanced as those which caused the 
bear attitude on the panic break, boom conditions 
are not immediately restored, nor does anything 
of the kind develop within a year or so after the 
crisis. The first recovery runs too far and has 
always run too far. What follows is not collapse, 
but dullness. It becomes imperative to make real 
savings in order to build up for the next boom in 
business.” 

A list of subjects about which merchants and in¬ 
vestors systematically collect, analyze, and index 
statistics, is given on the following page, and for 
convenience they are combined under twelve head¬ 
ings, which headings are herewith described in 
detail. Later in Chapters VI, VII, and VIII 
many of these important subjects are described in 
detail. These are the subjects studied by the 
oldest, richest, and most conservative financial 
and mercantile houses of the world for determining 
which of the above-mentioned periods the country 
is experiencing or is about to enter at any given 
time. The use of fundamental statistics eliminates 
much guessing and uncertainty concerning mercan¬ 
tile or stock market movements. 


TWO CLASSES OF STATISTICS 


19 


The only requirement is to collect, tabulate, and 
study the weekly and monthly figures as they are 
received. These plainly show whether the general 
tendency of any market is upward, or downward, 
and whether it is the time to buy or sell, or to do 
neither. 

As above stated, these fundamental statistics are 
even more important than comparative statistics. 
Not only are the latter of little value, unless sup¬ 
plemented by these fundamental statistics, but 
experience has shown that such investors as have 
confined their operations to standard securities, 
and such merchants as have bought standard goods, 
have made fortunes for themselves and their cus¬ 
tomers by a study of these fundamental statistics 
exclusively. 

Some of the subjects generally used are: 

I. Building and Real Estate: Including all New 
Building, Fire Losses, and records of the number of 
real estate sales. 

II. Bank Clearings and Check Transactions: 
Clearings and Check Transactions excluding New 
York. 

III. Business Failures: Failures, by number, 
liabilities, and percentage failing. 

IV. Labor Conditions: Immigration and Emigra¬ 
tion Figures. Number and pay-roll in certain 
industries. 

V. Money Conditions: Money in Circulation; 
Comptroller’s Reports; Loans; Deposits and Sur¬ 
plus Reserve of Banks; Federal Reserve State¬ 
ments. 


20 


BUSINESS BAROMETERS 


VI. Foreign Trade: Imports; Exports; Balance 
of Trade. 

VII. Gold Movements: Gold Exports and Im¬ 
ports; Domestic and Foreign Exchange, Money 
Rates. 

VIII. Commodity Prices: Foreign and Domestic 
Commodity Prices; Production of Gold and other 
monetary influences. 

IX. Investment Market: Stock Exchange Trans¬ 
actions and Security Prices; New Securities; New 
Corporations formed. 

X. Condition of Crops: Crop Conditions and 
Acreage. 

XI. Railroad Traffic: Gross and Net Earnings, 
Car Loadings, Tonnage and Number of Idle Cars. 

XII. Social and Religious Conditions: Labor 
Troubles and Church Membership Statistics, 
Political Factors. 

These twelve divisions may be briefly described 
as follows: 

I. The number of miles of new railroad con¬ 
structed, and especially figures on Building Statis¬ 
tics, give a clew to what new construction work is 
going on throughout the country. The exactness 
with which business conditions could have been 
foretold in the past by such figures is truly mar¬ 
velous. It may also be stated that iron is one of 
the first commodities to fall in price and one of the 
first to rise; therefore all merchants watch the price 
of iron. 

II. Bank Clearings and Check Transactions are 
extremely good barometers of present conditions 


TWO CLASSES OF STATISTICS 


21 


and are watched with keen interest by all successful 
merchants and manufacturers. Many large cor¬ 
porations each week compare the changes in their 
total sales with the changes in the total bank clear¬ 
ings or check transactions. If they find that these 
figures continually show an increase, while their 
sales remain fixed, they immediately endeavor to 
ascertain the reason therefor. Moreover, some 
firms divide the country into sections and compare 
by sections their sales with the bank clearings for 
said sections, thus having a check on the work of 
each individual sales office. 

III. Failures both in number and liabilities are 
especially good barometers of the conditions of 
trade. By ascertaining each month the average 
number of concerns in active business and the num¬ 
ber that have failed, the percentage of failures may 
be readily determined. Contrary to the ordinary 
impression, it is too few failures which foretell 
disaster and panic. 

IV. Figures on Immigration are studied by 
manufacturers as indicative of the conditions of 
the labor market. The arrival of thousands of 
immigrants indicates good surface conditions, with 
high prices for labor; but too large immigration 
figures are usually the forerunner of a period of 
depression. On the other hand, when large num¬ 
bers of steerage passengers are leaving the country 
and the incoming steerage is reduced, business is 
in a state of depression. As the tide turns and 
immigrants again begin to arrive, conditions are 
again improving. 


22 


BUSINESS BAROMETERS 


When immigration is restricted the data no 
longer reflect the demand for labor. In place of 
this the limited numbers are the cause of unsatis¬ 
factory conditions rather than the reflection of 
supply and demand for labor. 

The statistics of number employed and pay-roll 
by the Department of Labor and by certain states 
are extremely valuable, even though they do not 
represent the whole country. 

V. Money is the basis of all trade and is there¬ 
fore probably the most sensitive of all barometers. 
Money is the representative in value of all things 
traded in, and the scarcity of it seriously hampers 
the manufacturer and the merchant. Low money 
rates usually indicate poor present conditions tend¬ 
ing toward improved business; while high rates 
usually signify very prosperous present conditions, 
but often foretell a coming panic. Two sources of 
loan statistics are readily available. One is the 
“ loan and discount ” itefn reported each week by 
the leading member banks of the Federal Reserve 
System, a good index of the increase or decrease in 
the total borrowings of the whole country. The 
second is the report of “ bills discounted ” by the 
twelve Federal Reserve banks. When a local 
bank is unable to supply its customers with loans, 
it may rediscount certain of the notes it holds with 
its Federal Reserve bank. In a general way, the 
item, “ bills discounted,” indicates the extent to 
which the member banks have had to call upon the 
reserve banks for assistance. 

In judging the banking situation, we must take 


TWO CLASSES OF STATISTICS 


23 


into account the supply of money, or credit, which 
the banks have, as well as the demand for it. The 
rental price of money “ interest rates,” like the 
rent of anything else, is governed by the law of 
supply and demand. The supply of money is 
best shown by the ratio of the banks’ reserves to 
their liabilities. 

Since the inauguration of the Federal Reserve 
System, bank reserves are held chiefly by the Fed¬ 
eral Reserve banks. If it were not for the effect of 
gold imports, perhaps it would be necessary to 
watch only the supply of money, or reserves, in 
the banks. Heavy imports of gold, however, 
may temporarily inflate reserves without offering 
a safe basis for credit extension. Any increase in 
what is called the “ reserve ratio,” therefore, is 
always carefully analyzed by the student of funda¬ 
mentals. 

VI. Figures on Foreign Trade are also of great 
value. The foreign trade of the country bears the 
same relation to the nation as a whole, as the in¬ 
come and expense of an individual bear to the finan¬ 
cial condition of the said individual. A man who 
for any length of time spends more money than he 
receives is sure to have trouble eventually, and it 
is the same with a nation. Moreover, as the finan¬ 
cial prosperity of the individual is almost in direct 
proportion to his net income, so the prosperity of a 
nation very largely depends upon the volume of 
its foreign trade. 

VII. Monthly Gold Movements are also impor¬ 
tant for study in analyzing money rates, since the 


24 


BUSINESS BAROMETERS 


amount the banks can loan depends largely upon 
their gold reserves. 

VIII. The subject of Commodity Prices is very 
important. The amount of money required to 
carry on a definite volume of business becomes very 
much greater as prices increase. For this reason, 
bankers very carefully watch commodity prices, 
knowing that high money rates invariably follow a 
marked increase in commodity prices. , 

IX. The transactions and Prices of Stocks on the 
New York Stock Exchange are also interesting to 
merchants as well as to investors. The way money 
is made on the New York Stock Exchange is by 
anticipating price changes. The leading operators 
have statisticians continually studying fundamen¬ 
tal conditions in order to forecast future conditions, 
and base their purchases and sales on the informa¬ 
tion obtained. Therefore a slowly sagging market 
usually means that the ablest speculators expect 
in the near future a period of depression in general 
business; and a slowly rising market usually means 
that improving business conditions may be ex¬ 
pected, unless the decline or rise is artificial and 
caused by manipulation. In fact, if it were not for 
manipulation, merchants could almost rely on the 
stock market alone as a barometer, and let these 
large market operators stand the expense of col¬ 
lecting the data necessary for determining funda¬ 
mental conditions. Unfortunately, however, it is 
impossible by studying the stock market alone to 
distinguish between artificial movements and 
natural movements. Therefore, although bankers 


TWO CLASSES OF STATISTICS 


25 


and merchants may watch the stock market as one 
of the barometers, they should give to it only a fair 
and proportional amount of weight. 

X. Of all statistics published by the government 
the most important to the business man are Crop 
Reports. Most of the government figures refer to 
what has happened in the past, and many of these 
figures are published a year or more after the events 
have happened. In the case of the crops, however, 
the government actually forecasts. Therefore, all 
crop statistics are especially valuable to manufac¬ 
turers and merchants. 

The crops are one of the mainstays of America 
as nearly one-half of our population is dependent 
upon agriculture. Crop conditions formed the 
basis of James J. Hill’s predictions and business 
ventures. Mr. Hill, by the way, was a great stu¬ 
dent of fundamental statistics. The principal 
crops, grain and cotton, have a tremendous influ¬ 
ence upon our wealth. Many industries and 
mercantile firms are absolutely dependent on the 
crops, and commodity prices are always more or 
less dependent thereon. The grain reports and cot¬ 
ton reports issued by the government are watched 
with great interest. Manufacturers and merchants 
even watch the weather reports throughout the 
West, the progress of the “ grasshopper/’ the 
condition of the crops in the Argentine Republic, 
Russia, and other countries. Crop failures are 
usually followed by a year of uncertain conditions. 

XI. Railroad Earnings are extremely instructive 
and are used by some merchants in preference to 


26 


BUSINESS BAROMETERS 


many of the above subjects. Most manufactured 
goods and even supplies in the local retail stores are 
shipped by railroads. Therefore, a monthly record 
of freight which the railroads are carrying serves as 
a barometer of the business of all the farmers, 
manufacturers, and merchants of the country. 
Moreover, the steel companies, the car and loco¬ 
motive builders, the coal industry, and a hundred 
other industries are directly dependent on the rail¬ 
roads for their prosperity. Therefore, all mer¬ 
chants should watch railroad earnings and car 
loadings, and reduce or increase their stock of goods 
in accordance with what these reports show. 

XII. Social and Religious Factors: Although this 
subject comes last on our list, it might be con¬ 
sidered, if suitable figures could be found, by far 
the most valuable and important to our whole 
business structure. Business depressions are a di¬ 
rect result of extravagance, recklessness, waste, 
greed, and irreligion, which develop during the 
so-called boom times. During periods of depres¬ 
sion, we repent of our wasteful methods, we seek 
to perform true service in order to get the proper 
remuneration, and again place reliance on the true 
values in life. 

The political factor should perhaps also be in¬ 
cluded under this heading. Certainly, there is a 
relation which holds between politics and the busi¬ 
ness conditions. A study of fundamentals shows 
that the trend of political factors is more an effect 
of the other business fundamentals than a cause. 

Under this head should also be tabulated statis- 


TWO CLASSES OF STATISTICS 


27 


tics on general confidence, such as new securities 
issued, new incorporations, etc. When confidence 
is created and we are working toward better busi¬ 
ness these figures show startling increases. During 
periods of decline and depression the reverse is true. 
Such figures are but a meagre measure of this most 
fundamental group of indicators. 

It is an unanswerable argument that the statis¬ 
tics of new members of the nation’s leading churches 
show great gains when the country is in a depres¬ 
sion, and declines when the country, in the midst 
of a boom period, is throwing away money and 
burning the candle at both ends: 

To conclude, each of these twelve subjects is in¬ 
timately bound up with what are known as 
“ swings,” during which all prices change between 
“ high ” and “ low ” in accordance with the Law of 
Equal Reaction. All financial and commercial 
trade'during the past two hundred years has been 
divided into distinct movements. Each move¬ 
ment consists of four periods: a period of over¬ 
expansion, a period of decline, a period of depres¬ 
sion, and a period of improvement. Each period 
is accompanied by distinct changes in the prices of 
stocks, labor, and commodities. By comparison 
with similar periods in previous movements, it is 
possible with a degree of certainty to determine at 
about what period in one of these “ swings ” we 
happen to be. If the pendulum swings out over the 
perpendicular, we are sure that it must swing back 
of the center as far as it swung forward, because 
action and reaction are always equal. 


28 


BUSINESS BAROMETERS 


No country, however, can be prosperous unless 
it is progressive. No nation can stand still; it 
must go either forward or backward. The normal 
demands of our country for new construction must 
show an increase each year to have conditions even 
remain constant. There must be a distinct in¬ 
crease in order to keep the vast number of our new 
citizens busy. Therefore, in comparing the present 
with the past, a similar figure does not necessarily 
mean the same conditions, but in many instances 
may mean an actual falling off. This is very impor¬ 
tant and must be remembered when estimating an 
area to use for comparative purposes in connection 
with the Babsonchart which will be described 
later.* 


Conclusion 

The amount of money which can be made by the 
study of such statistics is limited only by the origi¬ 
nal capital and the number of years the study is 
continued. Comparative statistics treat of com¬ 
parative conditions and are used for selecting se¬ 
curities and commodities which are absolutely safe 
and which have the greatest prospect of increase in 

* Some firms when interpreting figures on each of the various subjects for 
surface conditions, prefer to determine each month what the proper average 
figure should be for each of these subjects and note the relation between the 
actual figures for surface conditions and these average figures. The average 
figure on any one subject is obtained by plotting the yearly figures on that 
subject for a period of ten or twenty years and by drawing on that plot a 
line showing the average trend for the entire period. Firms using this 
system obtain the average figure for any future time, assuming that the gen¬ 
eral direction of this average line will continue the same. Moreover, in the 
case of some subjects, it is often clearer to plot the relation of -present figures 
to a ten-year average rather than the actual figures. This is especially true 
with plotting commodity prices and other figures which show only a slight 
variation with seasonal changes. The writer, however, believes in this 
latter method only as a check upon, and not as a substitute for, the Bab¬ 
sonchart. 


TWO CLASSES OF STATISTICS 


29 


market value under fixed market conditions . Fun¬ 
damental statistics treat of underlying conditions 
and are employed for determining these general 
market conditions and whether or not it is wise to 
purchase, or to sell, or to do neither. Investors 
use this data in order to purchase stocks only when 
they are low, holding them for from two to four 
years until they are high, and then selling and de¬ 
positing in a bank the proceeds received therefrom. 
After said sale they leave the money on deposit for 
from two to four years,* until the same stocks 
again sell low, when they withdraw the money and 
again purchase the same or other high-grade stocks. 

Many of such investors double their money every 
few years, with practically no risk and with very 
little trouble. By a study of these fundamental 
statistics it is possible, with little risk and without 
any marginal purchases, but by purchasing out¬ 
right high-grade stocks to increase a capital of 
$5,000 into more than $100,000 in about twenty 
years. When one realizes the meaning of this,— 
that a capital of $50,000 grows to $1,000,000 within 
twenty years,— the value of fundamental sta¬ 
tistics is apparent. 

Again, many brokers urge customers to attempt 
to take advantage of minor movements of the 
stock market; recommending “ short selling ” for 
declines and the purchase of securities on margin 
for advances. Such advice is to be expected from 

* If this withdrawal at the time of a panic meant the hoarding of money 
or taking the money from circulation, we should not recommend any such 
course. Instead, the money is only withdrawn from one bank and de¬ 
posited in another, probably being used to liquidate some loan. 


30 


BUSINESS BAROMETERS 


a broker; but with short selling or margin pur¬ 
chases, there are other elements of risk. The in¬ 
vestor taking such risks becomes a gambler. 
Margin trading involves great risks and tends to 
involve the operator in fatal and excessive com¬ 
plications. 

The point, however, which this book would 
emphasize is: A capital of a few thousand dollars 
can he multiplied to a capital of several hundred 
thousand dollars in about twenty years with hut very 
little risk and without selling short or purchasing on 
margin. The only requisite is a constant study of 
comparative arid fundamental statistics and suffi¬ 
cient self-control to act only in accordance with 
what these statistics clearly indicate, refusing to 
listen to either the optimism or the pessimism sup¬ 
plied by the daily papers and by the many individ¬ 
uals who are always giving free advice. 

The above principles apply to bonds as truly as 
to stocks, and should be studied by the investors 
who purchase only bonds, as well as those who pur¬ 
chase stocks. Although bonds do not fluctuate as 
widely as stocks and for this reason do not present 
as great an opportunity for profit, yet their mini¬ 
mum interest yield is absolutely fixed, which is not 
true of even the most conservative stocks. Bonds 
are especially recommended to persons dependent 
upon the income derived from their investments. 
Furthermore the writer is inclined to advise that 
all persons should always have a portion of their 
principal on deposit in a bank, or in high-grade 
bonds, short-term notes, or commercial paper. 


TWO CLASSES OF STATISTICS 31 

Merchants who never even buy or sell securities 
use this data with equal profit. Fundamental sta¬ 
tistics clearly show the merchant when to buy and 
increase his stock of goods, and when to cut prices 
and reduce his stock. They also enable the mer¬ 
chant to forecast money conditions in order that 
he may intelligently decide whether to borrow the 
money necessary to allow customers further credit, 
or to reduce his loans and the indebtedness of his 
customers. Moreover, at all times, these figures 
shqw the merchant the conditions of business 
throughout the country, so that he always knows 
whether the growth or contraction of his business 
is proportional to that of his competitors. 

Upon careful thought, it must be admitted that 
the fortunes of American merchant princes must 
have been created by a knowledge of these facts, 
rather than simply by selling to the trade at a nom¬ 
inal profit. Therefore, not only does the proper 
use of fundamental statistics insure a merchant 
against losses, but their use should be almost as 
profitable to him as to the investor, enabling him 
to double and triple his capital every few years. 
Such ideas of the value of statistics should there¬ 
fore be especially interesting to the small merchant 
with capital of, for instance, only $10,000. For 
there is no reason why, with fundamental statistics 
as an aid, his capital should not automatically in¬ 
crease to $250,000 within twenty years. 

Not only do students of fundamental statistics 
make large fortunes for themselves and their fol¬ 
lowers, but such students are the very best patriots 


32 


BUSINESS BAROMETERS 


which a country can produce. The true patriot 
is he who studies fundamental statistics and acts 
in accordance with what they teach, liquidating 
during a period of reckless prosperity and purchas¬ 
ing very heavily during days of panic and great 
depression. The real traitor today is he who 
urges on or follows the crowd during a period of 
over-expansion, and then locks up his money and 
refuses to extend aid during the dark days when 
banks are failing, railroads are becoming bankrupt 
and the wheels of industry are stopped. Therefore, 
with every additional person who unites in this 
work, the next period of over-expansion will be so 
much less riotous and the next panic so much less 
severe. There must be a reaction for everything 
we do, say or think. If it is not a harmful reaction, 
it is a beneficial one. 


CHAPTER II 


RANGE OF THE LEADING STOCKS SINCE 1860, 
SHOWING HOW $2,500 INVESTED IN 1861 WOULD 
AMOUNT TO OVER $3,000,000 IN 1923. SPECIAL 
TABLES ON INVESTMENT BONDS. 

T HE quotations on the following pages show 
the fluctuations in leading railroad stocks 
from 1860 to date as accurately as may be. 
The ten stocks used are as representative as pos¬ 
sible of the different sections of the country and the 
different classes of traffic for the period as a whole. 

Only three of the ten were in existence and 
prominent in 1860. New York Central, Illinois 
Central and Delaware, Lackawanna & Western 
were active then and are leaders still. 

In 1866 “ Delaware & Hudson ” became active, 
in 1872 “ Louisville & Nashville,” and in 1874 
“ Central of New Jersey.” In 1876, “ Pullman ” 
became active and in 1890 “ Pennsylvania.” These 
are the ten stocks used exclusively until 1900 when 
“ Delaware, Lackawanna & Western ” was omitted. 
As “ Great Northern ” then sold for the same 
price, namely 191, that was substituted in its 
stead. 

In other words, only the old well-known railroad 
stocks have been included in the list. Stocks 
which have shown any abnormal rise have pur¬ 
posely been avoided. For this reason, stocks such 
as “ Union Pacific,” “ Atchison,” and “ Reading ” 


34 


BUSINESS BAROMETERS 


have been omitted. In recent years two of the 
stocks have ceased to pay dividends, but for the 
sake of uniformity they have been retained. In¬ 
dustrials would have been included, if they had 
been in existence a longer period. As most of the 
industrial companies have been organized only a 
comparatively short number of years, this was not 
possible. Therefore, the table may be depended 
upon, absolutely, as showing the fluctuations 
which a conservative investor may expect. 

On account of the narrower fluctuations of the 
railroad stocks in the past ten years the table 
shows less favorable results than could be actually 
obtained in practice by buying other groups. 

It has also been very interesting to figure the 
income received upon the cost, which varied from 
5% to 10%. If all “ rights ” were considered the 
average income would probably be about 10%; 
but in this also any possible exaggeration has been 
avoided. For greater exactness, since “ Great 
Northern ” gave its ore certificates, the price of 
these certificates has been included with the price 
of the stock. The dividends on each stock at the 
low point in 1907 and in January of later years 
were as follows: 


Low Jan. Jan. Jan. Jan. 
Div. 1907Div. 1910 Div. 1911 Div. 1912 Div. 1913 


Central N. J. $8 $144 $8 $312 $8 $270 $12 $310 $12 $360 

C., M. & St. Paul. 7 93 7 158 7 124 7 110 5 113 

Del. & Hud. 9 124 9 185 9 164 9 168 9 162 

G. North.+1 Ore. Cert. 7 144 8 225 8 180 7 170 7 172 

Illinois Cent. 7 116 7 146 7 132 7 140 6 127 

Louis. & Nash. 6 85 5* 158 7 145 7 155 7 142 

N. Y. Central. 6 89 5 125 6 112 5 107 5 109 

N. Y..N.H.AH. 8 127 8 158 8 150 8 137 5 128 

Pennsylvania. 7 103 6 136 6 129 6 123 6 122 

Pullman. 8 135 8 189 8 160 8 160 8 165 











RANGE OF STOCK MARKET 


35 


Jan. Jan. Jan. Jan. Jan. 
Div. 1914 Div. 1915 Div. 1916 Div.jl917 Div.yl918 


Central N. J.$12 $308 $12 $295 $12 $290 $12 $300 $12 $220 

C., M. & St. Paul. 5 99 4* 87 5 95 4* 87 0 ft |]41 

Del. & Hud. 9 150 9 142 9 150 9 150 9 106 

G. North.+1 Ore. Cert. 7 159 7 138 7 162 7 150 7 111 

Illinois Cent. 5 107 9 107 6* 105 7 105 7 ! 92 

Louis. & Nash. 7 134 5 112 6 124 7 128 7-iiHO 

N. Y. Central. 5 88 5 85 5 104 5 100 5 L68 

N. Y., N. H. &H. 0 73 0 49 0 65 0 40 0 128 

Pennsylvania. 6 109 6 104 6 114 6 113 6 90 

Pullman. 8 152 8 152 8 164 8 163 8 100 


Jan. Jan. Jan. Jan. Jan. 

Div. 1919 Div. 1920 Div. 1921 Div. 1922 Div. 1923 

Central N. J. $12 $207 $10 $175 $14 $201 $10 $189 . .. $215 

C., M. & St. Paul. 0 36 0 35 0 28 0 17 ... 22 

Del. & Hud. 9 101 9 93 9 100 9 107 .. . Ill 

G. North.+1 Ore. Cert. 7 122 7 114 7 103 8* 101 ... 105 

Illinois Cent. 7 95 7 88 7 87 7 98 ... 112 

Louis. & Nash. 7 113 7 106 7 98 7 108 . . . 134 

N. Y. Central. 5 69 5 68 5 71 5 73 ... 94 

N. Y., N. H. & H. 0 28 0 26 0 19 0 12 . .. 20 

Pennsylvania. 6 89 6 82 4* 80 4 66 ... 94 

Pullman.'... 8 120 8 114 8 105 8 105 .. . 130 


It should always be remembered that an inves¬ 
tor, when buying or selling, should study the price 
level of a large number of representative stocks. 
The list must be sufficient to show the effect of 
the Law of Equal Reaction. This is because he 
should buy or sell in accordance with general con¬ 
ditions, and not be governed by the price of any 
stocks which he happens to hold. 

The actual low and high prices of the above ten 
stocks from 1860 to date are given in the accom¬ 
panying tables. The “averages” given at the be¬ 
ginning of each year previous to 1877 are averages 
of all the high and all the low prices, regardless of 
what day in the year they occurred, and therefore 
may be a theoretical rather than an actual figure, 
while quotations from the beginning of 1877 are 
the averages of the stocks named, all figures being 
taken on the same date. 




















36 


BUSINESS BAROMETERS 


1860 AVERAGE 59-93 

Lackawanna ranged from 54 (Jan.) to 99 (June); 
Ill. Cent. 55 (Jan.) to 89 (Aug.); N. Y. Cent. 92 
(Sept.) to 69 (Dec.). 

1861 AVERAGE 62-84 

Lackawanna ranged from 84 (Mch.) to 65 (Dec.); 
Ill. Cent. 88 (Jan.) to 55 (April); N. Y. Cent. 82 
(Jan.) to 68 (April). 

1862 AVERAGE 71-107 ' 

Lackawanna ranged from 80 (April) to 130 

(Dec.); Ill. Cent. 55 (July) to 84 (Oct.); N. Y. 
Cent. 79 (Jan.) to 107 (Oct.). 

1863 AVERAGE 106-153 
Lackawanna ranged from 130 (Jan.) to 198 

(Dec.); Ill. Cent. 83 (Jan.) to 126 (Aug.); N. Y. 
Cent. 107 (Mch.) to 140 (Sept.). 

1864 AVERAGE 141-177 
Lackawanna ranged from 195 (Jan.) to 265 

(Sept.); Ill. Cent. 117 (Jan.) to 135 (Oct.); N. Y. 
Cent. 145 (Mch.) to 109 (Oct.). 

1865 AVERAGE 125-158 
Lackawanna ranged from 225 (Jan.) to 199 

(Mch.); Ill. Cent. 92 (Mch.) to 130 (July); N. Y. 
Cent. 119 (Jan.) to 85 (April). 

1866 AVERAGE 99-128 

St. Paul ranged from 41 (Mch.) to 64 (Nov.); 
Del, & Hud. 132 (Mch.) to 160 (Nov.); Lacka¬ 
wanna 162 (Aug.) to 124 (Mch.); Ill. Cent. 131 
(Jan.) to 112 (Feb.); N. Y. Cent. 86 (Feb.) to 123 
(Nov.). 


RANGE OF STOCK MARKET 


37 


1867 AVERAGE 98-122 

Cent, of N. J. ranged from 125 (Jan.) to 113 
(Dec.); St. Paul 25 (April) to 54 (July); Del. & 
Hud. 139 (Jan.) to 156 (Jan.); Lackawanna 130 
(July) to 109 (Oct.); Ill. Cent. Ill (Jan.) to 135 
(Dec.); N. Y. Cent. 94 (Feb.) to 118 (Dec.); New 
Haven 114 (Jan.) to 140 (Dec.). 

1868 AVERAGE 108-144 

Cent, of N. J. ranged from 126 (June) to 110 
(Dec.); St. Paul 46 (Feb.) to 111 (Oct.); Del. & 
Hud. 165 (May) to 119 (Aug.); Lackawanna 110 
(Jan.) to 132 (Oct.); Ill. Cent. 130 (Jan.) to 159 
(July); N. Y. Cent. 110 (April) to 159 (Dec.); New 
Haven 133 (Jan.) to 159 (May). 

1869 AVERAGE 114-144 

St. Paul ranged from 84 (Aug.) to 61 (Sept.); 
Del. & Hud. 134 (June) to 120 (Dec.); Lackawanna 
120 (Jan.) to 104 (Nov.); Ill. Cent. 148 (May) to 
130 (Dec.); N. Y. Cent. 217 (July) to 153 (Sept.); 
New Haven 160 (Jan.) to 120 (April). 

1870 AVERAGE 102-120 

St. Paul ranged from 75 (Jan.) to 52 (Dec.); 
Del. & Hud. 115 (Mch.) to 127 (July); Lacka¬ 
wanna 112 (May) to 100 (Sept.); Ill. Cent. 145 
(Feb.) to 129 (July); N. Y. Cent. 86 (Jan.) to 102 
(June); New Haven 134 (Jan.) to 159 (June). 

1871 AVERAGE 103-117 

St. Paul ranged from 48 (Jan.) to 64 (Sept.); 
Del. & Hud. 115 (Feb.) to 125 (Dec.); Lackawanna 
102 (Feb.) to 111 (Sept.); Ill. Cent. 139 (Jan.) to 
132 (Oct.); N. Y. Cent. 103 (April) to 84 (Oct.); 
New Haven 140 (April) to 160 (June). 


38 


BUSINESS BAROMETERS 


1872 AVERAGE 97-110 

St. Paul ranged from 64 (April) to 51 (Nov.); 
Del. & Hud. 124 (Jan.) to 115 (Oct.); Lackawanna 
112 (Mch.) to 91 (Dec.); Ill. Cent. 140 (June) to 
119 (Nov.); Louis. & Nash. 81 (Oct.) to 79 (Dec.); 
N. Y. Cent. 101 (April) to 89 (Nov.); New Haven 
168 (June) to 138 (Dec.). 

1873 AVERAGE 75-106 

St. Paul ranged from 62 (April) to 21 (Nov.); 
Del. & Hud. 124 (Feb.) to 99 (Nov.); Lackawanna 
106 (June) to 79 (Nov.); Ill. Cent. 126 (Jan.) to 
90 (Nov.); Louis. & Nash. 79 (Mch.) to 50 (Dec.); 
N. Y. Cent. 106 (Feb.) to 77 (Nov.); New Haven 
142 (Feb.) to 112 (Nov.) . 

1874 AVERAGE 87-100 

Cent, of N. J. ranged from 98 (Jan.) to 109 
(Feb.); St. Paul 49 (Jan.) to 31 (May); Del. & 
Hud. 121 (Jan.) to 113 (Aug.); Lackawanna 99 
(Jan.) to 112 (Feb.); Ill. Cent. 108 (Feb.) to 90 
(Oct.); Louis. & Nash. 53 (Jan.) to 59 (Feb.); 
N. Y. Cent. 105 (Mch.) to 95 (May); New Haven 
122 (Jan.) to 139 (Nov.). 

1875 AVERAGE 87-100 

Cent, of N. J. ranged from 120 (April) to 99 
(Oct.); St. Paul 40 (April) to 28 (June); Del. & 
Hud. 110 (Feb.) to 124 (Dec.); Lackawanna 106 
(Jan.) to 123 (April); Ill. Cent. 106 (April) to 88 
(Oct.); Louis. & Nash. 40 (Feb.) to 36 (April); 
N. Y. Cent. 100 (May) to 107 (May); New Haven 
133 (Jan.) to 147 (Dec.). 


RANGE OF STOCK MARKET 


39 


1876 AVERAGE 62-100 

Cent, of N. J. ranged from 109 (Feb.) to 21 
(Sept.); St. Paul 46 (Feb.) to 18 (Nov.); Del. & 
Hud. 125 (Jan.) to 61 (Oct.); Lackawanna 120 
(Jan.) to 64 (Oct.); Ill. Cent. 103 (Mch.) to 60 
(Dec.); Louis. & Nash. 32 (April) to 24 (Dec.) 
N. Y. Cent. 117 (Feb.) to 96 (Sept.); New Haven 
146 (Jan.) to 159 (Mch.); Pullman 70 (Jan.) to 85 
(April). 

1877 AVERAGE 54-75 

Cent, of N. J. ranged from 37 (Jan.) to 6 (June); 
St. Paul 11 (April) to 42 (Oct.); Del. & Hud. 74 
(Jan.) to 25 (June); Lackawanna 77 (Jan.) to 30 
(June); Ill. Cent. 40 (April) to 79 (Oct.); Louis. 
& Nash. 26 (Mch.) to 41 (Dec.); N. Y. Cent. 85 
(April) to 109 (Oct.); New Haven 146 (April) to 
158 (Dec.); Pullman 75 (Feb.) to 71 (Mch.). 

1878 AVERAGE 69-82 

Cent, of N. J. ranged from 13 (Jan.) to 45 (July); 
St. Paul 54 (June) to 27 (Sept.); Del. & Hud. 59 
(July) to 34 (Dec.); Lackawanna 61 (July) to 41 
(Dec.); Ill. Cent. 72 (Feb.) to 87 (July); Louis. & 
Nash. 35 (Oct.) to 39 (Dec.); N. Y. Cent. 103 
(Mch.) to 115 (Sept.); New Haven 153 (Jan.) to 
162 (Nov.); Pullman 72 (Feb.) to 80 (July). 

1879 AVERAGE 69-104 

Cent, of N. J. ranged from 33 (Jan.) to 89 (Nov.); 
St. Paul 34 (Jan.) to 82 (Nov.); Del. & Hud. 38 
(Feb.) to 89 (Nov.); Lackawanna 43 (Jan.) to 94 
(Nov.); Ill. Cent. 79 (Mch.) to 100 (Dec.); Louis. 
& Nash. 35 (Feb.) to 89 (Dec.); N. Y. Cent. 112 


40 


BUSINESS BAROMETERS 


(Mch.) to 139 (Nov.); New Haven 171 (June) to 

154 (Nov.); Pullman 73 (Jan.) to 109 (Nov.). 

1880 AVERAGE 99-123 

Cent. Of N. J. ranged from 90 (Mch.) to 45 
(May); St. Paul 66 (May) to 114 (Dec.); Del. & 
Hud. 60 (May) to 92 (Dec.); Lackawanna 68 
(May) to 110 (Dec.); Ill. Cent. 99 (Jan.) to 127 
(Dec.); Louis. & Nash. 174 (Nov.) to 77 (Dec.); 
N. Y. Cent. 122 (May) to 155 (Dec.); New Haven 

155 (Jan.) to 180 (Oct.); Pullman 107 (Jan.) to 
146 (Dec.). 

1881 AVERAGE 121-134 

Cent, of N. J. ranged from 82 (Jan.) to 112 
(Feb.); St. Paul 101 (Feb.) to 129 (June); Del. & 
Hud. 89 (Jan.) to 115 (Mch.); Lackawanna 107 
(Jan.) to 131 (Mch.); Ill. Cent. 124 (Jan.) to 146 
(May); Louis. & Nash. 79 (Feb.) to 110 (May); 
N. Y. Cent. 155 (Jan.) to 130 (Dec.); New Haven 
164 (Mch.) to 190 (June); Pullman 151 (Jan.) to 
.120 (Dec.). 

1882 AVERAGE 113-126 

Cent, of N. J. ranged from 97 (Feb.) to 63 
(Nov.); St. Paul 128 (Sept.) to 96 (Nov.); Del. & 
Hud. 102 (Mch.) to 119 (Aug.); Lackawanna 116 
(April) to 150 (Sept.); Ill. Cent. 127 (Jan.) to 150 
(Oct.); Louis. & Nash. 100 (Jan.) to 46 (Nov.); 
N. Y. Cent. 123 (May) to 138 (Aug.); New Haven 
168 (Feb.) to 186 (Nov.); Pullman 145 (Jan.) to 
117 (June). 

1883 AVERAGE 109-119 

Cent/of N. J. ranged from 68 (Jan.) to 90 (Oct.); 
St. Paul 108 (Jan.) to 91 (Dec.); Del. &*Hud. 112 


RANGE OF STOCK MARKET 


41 


(April) to 102 (Oct.); Lackawanna 131 (April) to 
111 (Oct.); Ill. Cent. 148 (June) to 124 (Aug.); 
Louis. & Nash. 58 (Jan.) to 40 (Aug.); N. Y. Cent. 
129 (Mch.) to 111 (Dec.); New Haven 169 (Jan.) 
to 183 (June); Pullman 134 (June) to 112 (Dec.). 

1884 AVERAGE 85-113 

Cent, of N. J. ranged from 90 (Jan.) to 37 (Dec.); 
St. Paul 94 (Jan.) to 58 (June); Del. & Hud. 114 
(Feb.) to 67 (Dec.); Lackawanna 133 (Mch.) to 86 
(Dec.); Ill. Cent. 140 (Feb.) to 110 (June); Louis. 
& Nash. 51 (Mch.) to 22 (June); N. Y. Cent. 122 
(Mch.) to 83 (Nov.); New Haven 184 (May) to 
175 (July); Pullman 117 (Jan.) to 90 (May). 

1885 AVERAGE 86-111 

Cent, of N. J. ranged from 31 (Mch.) to 52 
(Aug.); St. Paul 64 (June) to 99 (Nov.); Del. & 
Hud. 66 (Jan.) to 100 (Nov.); Lackawanna 82 
(Jan.) to 129 (Dec.); Ill. Cent. 119 (Jan.) to 140 
(Dec.); Louis. & Nash. 22 (Jan.) to 51 (Nov.); 
N. Y. Cent. 81 (June) to 107 (Nov.); New Haven 
175 (Jan.) to 204 (Dec.); Pullman 107 (Jan.) to 
137 (Nov.). 

1886 AVERAGE 106-118 

Cent, of N. J. ranged from 42 (Jan.) to 64 
(Sept.); St. Paul 82 (May) to 96 (Dec.); Del. & 
Hud. 87 (Dec.) to 108 (Feb.); Lackawanna 115 
(Jan.) to 144 (Dec.); Ill. Cent. 143 (Feb.) to 130 
(Dec.); Louis. & Nash. 33 (May) to 69 (Dec.); 
N. Y. Cent. 98 (May) to 117 (Oct.); New Haven 
204 (Jan.) to 223 (Nov.); Pullman 128 (May) to 
147 (Oct.). 


42 


BUSINESS BAROMETERS 


1887 AVERAGE 112-125 

Cent, of N. J. ranged from 55 (Jan.) to 86 
(April); St. Paul 95 (May) to 69 (Oct.); Del. & 
Hud. 96 (Sept.) to 106 (Nov.); Lackawanna 139 
(June) to 123 (Oct.); Ill. Cent. 138 (May) to 114 
(Oct.); Louis. & Nash. 70 (April) to 54 (Oct.); 
N. Y. Cent. 114 (May) to 101 (Oct.); New Haven 
208 (Feb.) to 233 (May); Pullman 159 (May) to 
136 (Nov.). 

1888 AVERAGE 113-126 

Cent, of N. J. ranged from 73 (April) to 95 
(Dec.); St. Paul 78 (Feb.) to 59 (Dec.); Del. & 
Hud. 103 (Jan.) to 134 (Dec.); Lackawanna 123 
(April) to 145 (Oct.); Ill. Cent. 123 (Aug.) to 113 
(Dec.); Louis. & Nash. 64 (Jan.) to 50 (April); 
N. Y. Cent. 102 (April) to 111 (Sept.); New Haven 
215 (Jan.) to 244 (Dec.); Pullman 135 (April) to 
175 (Sept.). 

1889 AVERAGE 123-136 

Cent, of N. J. ranged from 92 (Mch.) to 131 
(Oct.); St. Paul 60 (Mch.) to 75 (June); Del. & 
Hud. 130 (Mch.) to 156 (Sept.); Lackawanna 134 
(April) to 151 (Sept.); Ill. Cent. 106 (Feb.) to 118 
(Dec.); Louis. & Nash. 56 (Jan.) to 87 (Nov.); 
N. Y. Cent. 110 (Feb.) to 104 (July); New Haven 
241 (Jan.) to 279 (Sept.); Pullman 205 (Feb.) to 
171 (Mch.). 

1890 AVERAGE 118-142 

Cent, of N. J. ranged from 128 (May) to 92 
(Nov.); St. Paul 78 (May) to 44 (Nov.); Del. & 
Hud. 175 (May) to 120 (Dec.); Lackawanna 149 
(July) to 123 (Nov.); Ill. Cent. 120 (Jan.) to 85 


RANGE OF STOCK MARKET 


43 


(Nov.); Louis. & Nash. 92 (May) to 65 (Nov.); 
N. Y. Cent. Ill (June) to 95 (Dec.); New Haven 
244 (Jan.) to 270 (June); Pennsylvania 113 (May) 
to 95 (Nov.); Pullman 222 (July) to 160 (Dec.). 

1891 AVERAGE 115-128 

Cent, of N. J. ranged from 122 (April) to 105 

(June); St. Paul 51 (Mch.) to 82 (Dec.); Del. & 

Hud. 140 (Sept.) to 120 (Dec.); Lackawanna 130 
(July) to 145 (Sept.); Ill. Cent. 90 (Mch.) to 109 
(Dec.); Louis. & Nash. 65 (Aug.) to 83 (Dec.); 
N. Y. Cent. 98 (July) to 119 (Dec.); New Haven 
271 (Feb.) to 224 (Nov.); Pennsylvania 99 (May) 
to 115 (Dec.); Pullman 196 (Jan.) to 172 (Nov.). 

1892 AVERAGE 126-135 

Cent, of N. J. ranged from 111 (Jan.) to 145 

(Feb.); St. Paul 75 (April) to 84 (Aug.); Del. & 

Hud. 122 (Jan.) to 149 (April); Lackawanna 138 
(Jan.) to 167 (Feb.); Ill. Cent. 110 (Jan.) to 95 
(Sept.); Louis. & Nash. 84 (Jan.) to 64 (Sept.); 
N. Y. Cent. 119 (Mch.) to 107 (Sept.); New Haven 
224 (Jan.) to 255 (Dec.); Pennsylvania 114 (Jan.) 
to 106 (Nov.); Pullman 184 (Jan.) to 200 (May). 

1893 AVERAGE 102-135 

Cent, of N. J. 132 (Jan.) to 84 (July); St. Paul 
83 (Jan.) to 46 (July); Del. & Hud. 139 (Jan.) to 
102 (July); Lackawanna 127 (July) to 175 (Nov.); 
Ill. Cent. 104 (Jan.) to 86 (July); Louis. & Nash. 77 
(Jan.) to 39 (Dec.); N. Y. Cent. Ill (Jan.) to 92 
(July); New Haven 262 (Jan.) to 188 (Sept.); 
Pennsylvania 111 (Jan.) to 93 (Dec.); Pullman 206 
(April) to 132 (Aug.). 


44 


BUSINESS BAROMETERS 


1894 AVERAGE 106-115 

Cent, of N. J. ranged from 117 (Mch.) to 87 
(Dec.); St. Paul 54 (Jan.) to 67 (Sept.); Del. & 
Hud. 144 (April) to 119 (Oct.); Lackawanna 174 
(Sept.) to 155 (Oct.); Ill. Cent. 95 (Sept.) to 82 
(Dec.); Louis. & Nash. 40 (Jan.) to 57 (Sept.); 
N. Y. Cent. 95 (May) to 102 (Aug.); New Haven 
178 (July) to 197 (Dec.); Pennsylvania 96 (Jan.) 
to 104 (April); Pullman 174 (April) to 152 (July). 

1895 AVERAGE 105-121 

Cent, of N. J. ranged from 81 (Feb.) to 116 
(Sept.); St. Paul 53 (Mch.) to 78 (Sept.); Del. & 
Hud. 134 (Sept.) to 118 (Dec.); Lackawanna 174 
(Oct.) to 154 (Dec.); Ill. Cent. 81 (Jan.) to 106 
(Sept.); Louis. & Nash. 66 (Sept.) to 39 (Dec.); 
N. Y. Cent. 104 (Aug.) to 90 (Dec.); New Haven 
218 (June) to 174 (Dec.); Pennsylvania 97 (Jan.) 
to 115 (Sept.); Pullman 178 (June) to 146 (Dec.). 

1896 AVERAGE 99-113 

Cent, of N. J. ranged from 87 (Aug.) to 110 
(Nov.); St. Paul 59 (Aug.) to 80 (Nov.); Del. & 
Hud. 129 (Feb.) to 114 (Aug.); Lackawanna 166 
(June) to 138 (Aug.); Ill. Cent. 98 (Jan.) to 84 
(Aug.); Louis & Nash. 55 (Feb.) to 37 (Aug.); 
N., Y. Cent. 99 (Feb.) to 88 (Aug.); New Haven 
184 (Jan.) to 160 (July); Pennsylvania 109 (April) 
to 99 (Aug.); Pullman 164 (Feb.) to 138 (Aug.). 

1897 AVERAGE 104-124 

Cent, of N. J. ranged from 103 (Jan.) to 68 
(May); St. Paul 69 (April) to 102 (Sept.); Del. & 
Hud. 99 (April) to 123 (Sept.); Lackawanna 146 


RANGE OF STOCK MARKET 


45 


(May) to 164 (Aug.); Ill. Cent. 91 (April) to 110 
(Aug.); Louis. & Nash. 40 (April) to 63 (Sept.); 
N. Y. Cent. 92 (Feb.) to 115 (Sept.); New Haven 
160 (Feb.) to 185 (Sept.); Pennsylvania 103 (Jan.) 
to 119 (Sept.); Pullman 152 (Jan.) to 185 (Sept.). 

1898 AVERAGE 115-127 

Cent, of N. J. ranged from 84 (Nov.) to 99 
(Dec.); St. Paul 83 (April) to 120 (Dec.); Del. & 
Hud. 114 (Feb.) to 93 (Nov.); Lackawanna 159 
(Feb.) to 140 (Oct.); Ill. Cent. 96 (April) to 115 
(Dec.); Louis. & Nash. 44 (April) to 65 (Dec.); 
N. Y. Cent. 105 (Mch.) to 124 (Dec.); New Haven 
178 (Jan.) to 201 (Dec.); Pennsylvania 110 (Mch.) 
to 123 (Dec.); Pullman 216 (July) to 132 (Nov.). 

1899 AVERAGE 126-144 

Cent, of N. J. ranged from 97 (Jan.) to 126 
(Nov.); St. Paul 136 (Sept.) to 112 (Dec.); Del. & 
Hud. 106 (Jan.) to 135 (Sept.); Lackawanna 157 
(Jan.) to 194 (Oct.); Ill. Cent. 122 (Jan.) to 105 
(Dec.); Louis. & Nash. 63 (Mch.) to 88 (Oct.); 
N. Y. Cent. 144 (Mch.) to 120 (Dec.); New Haven 
198 (Jan.) to 222 (April); Pennsylvania 122 (Jan.) 
to 142 (Jan.); Pullman 156 (Jan.) to 207 (Oct.). 

1900 AVERAGE 132-155 

Cent, of N. J. ranged from 115 (Jan.) to 150 
(Dec.); St. Paul 108 (June) to 148 (Dec.); Del. & 
Hud. 106 (Sept.) to 134 (Dec.); *Gt. Northern 144 
(June) to 191 (Dec.); Ill. Cent. 110 (June) to 132 
(Dec.); Louis. & Nash. 68 (Sept.) to 89 (Dec.); 

* Great Northern is substituted here for Lackawanna with the Ore 
Certificates added beginning with 1907. 


46 


BUSINESS BAROMETERS 


N. Y. Cent. 125 (June) to 145 (Dec.); New Haven 
215 (Jan.) to 207 (Sept.); Pennsylvania 124 (Sept.) 
to 149 (Dec.); Pullman 176 (June) to 204 (Dec.). 

1901 AVERAGE 154-172 

Cent, of N. J. 145 (Jan.) to 196 (Dec.); St. Paul 
134 (May) to 188 (May); Del. & Hud. 185 (April) 
to 105 (May); Gt. Northern 208 (Mch.) to 167 
(May); Ill. Cent. 124 (May) to 154 (June): Louis 
& Nash. 76 (May )to 111 (June); N. Y. Cent. 129 
(Jan.) to 174 (Nov.); New Haven 206 (Feb.) to 
217 (June); Pennsylvania 161 (April) to 137 
(May); Pullman 195 (Jan.) to 225 (Oct.). 

1902 AVERAGE 170-190 

Cent, of N. J. ranged from 198 (Jan.) to 165 
(Nov.); St. Paul 160 (Jan.) to 198 (Sept.); Del. & 
Hud. 184 (Jan.) to 153 (Nov.); Gt. Northern 181 
(Mch.) to 203 (Dec.); Ill. Cent. 137 (Jan.) to 173 
(Aug.); Louis. & Nash. 102 (Jan.) to 159 (Aug.); 
N. Y. Cent. 168 (Jan.) to 147 (Nov.); New Haven 
209 (Jan.) to 255 (April); Pennsylvania 147 (Jan.) 
to 170 (Sept.); Pullman 215 (Jan.) to 250 (April). 

1903 AVERAGE 146-180 

Cent, of N. J. ranged from 190 (Jan.) to 153 
(Oct.); St. Paul 183 (Jan.) to 133 (Aug.); Del. & 
Hud. 183 (Feb.) to 149 (Aug.); Gt. Northern 209 
(Jan.) to 160 (Oct.); Ill. Cent. 151 (Jan.) to 125 
(July); Louis. & Nash. 130 (Jan.) to 95 (Sept.); 
N. Y. Cent. 156 (Jan.) to 112 (July); New Haven 
225 (Jan.) to 187 (May); Pennsylvania 157 (Jan.) 
to 110 (Nov.); Pullman 235 (Jan.) to 196 (July). 


RANGE OF STOCK MARKET 


47 


1904 AVERAGE 148-181 

Cent, of N. J. ranged from 154 (Feb.) to 194 
(Nov.); St. Paul 137 (Feb.) to 177 (Dec.); Del. & 
Hud. 149 (Mch.) to 190 (Dec.); Gt. Northern 170 
(Mch.) to 242 (Dec.); Ill. Cent. 125 (Feb.) to 159 
(Dec.); Louis. & Nash. 101 (Feb.) to 148 (Dec.); 
N. Y. Cent. 112 (Mch.) to 145 (Dec.); New Haven 
185 (May) to 199 (Oct.); Pennsylvania 111 (Mch.) 
to 140 (Dec.); Pullman 209 (Mch.) to 242 (Nov.). 

1905 AVERAGE 180-204 

Cent, of N. J. ranged from 190 (May) to 235 
(Oct.); St. Paul 168 (May) to 187 (Aug.); Del. & 
Hud. 178 (May) to 240 (Oct.); Gt. Northern 236 
(Jan.) to 335 (April); Ill. Cent. 152 (Jan.) to 183 
(Sept.); Louis. & Nash. 134 (Jan.) to 157 (Sept.); 
N. Y. Cent. 167 (Mch.) to 136 (May); New Haven 
216 (Sept.) to 191 (Dec.); Pennsylvania 131 (May) 
to 148 (Aug.); Pullman 230 (May) to 258 (Aug.). 

1906 AVERAGE 180-205 

Cent, of N. J. ranged from 204 (May) to 239 
(May); St. Paul 189 (Nov.) to 146 (Dec.); Del. & 
Hud. 189 (May) to 232 (Dec.); Gt. Northern 348 
(Feb.) to 249 (Dec.); Ill. Cent. 164 (May) to 184. 
(June); Louis. & Nash. 156 (Jan.) to 136 (May); 
N. Y. Cent. 156 (Jan.) to 126 (Nov.); New Haven 
204 (Jan.) to 189 (Dec.); Pennsylvania 147 (Jan.) 
to 122 (July); Pullman 270 (Nov.) to 180 (Dec.). 

1907 AVERAGE 119-183 

Cent, of N. J. ranged from 220 (Jan.) to 144 
(Nov.); St. Paul 157 (Jan.) to 93 (Nov.); Del. & 


48 


BUSINESS BAROMETERS 


Hud. 227 (Jan.) to 124 (Nov.); Gt. Northern *274 
(Jan.) to 144 (Oct.); Ill. Cent. 172 (Jan.) to 116 
(Nov.); Louis. & Nash. 145 (Jan.) to 85 (Nov.); 
N. Y. Cent. 134 (Jan.) to 89 (Dec.); New Haven 
189 (Jan.) to 127 (Nov.); Pennsylvania 141 (Jan.) 
to 103 (Nov.); Pullman 181 (Jan.) to 135 (Nov.). 

1908 AVERAGE 126-164 

Cent, of N. J. ranged from 160 (Feb.) to 229 
(Dec.); St. Paul 103 (Jan.) to 152 (Dec.); Del. & 
Hud. 141 (Feb.) to 181 (Dec.); Gt. Northern 163 
(Feb.) to *223 (Dec.); Ill. Cent. 122 (Feb.) to 
150 (Nov.); Louis. & Nash. 87 (Feb.) to 126 
(Dec.); N. Y. Cent. 90 (Jan.) to 126 (Dec.); New 
Haven 128 (Jan.) to 161 (Nov.); Pennsylvania 109 
(Jan.) to 132 (Dec.); Pullman 147 (Jan.) to 174 
(Nov.). 

1909 AVERAGE 156-190 

Cent, of N. J. ranged from 215 (Feb.) to 323 
(Sept.); St. Paul 141 (Feb.) to 165 (Sept.); Del. & 
Hud. 168 (Feb.) to 200 (May); Gt. Northern 201 
(Feb.) to *246 (Aug.); Ill. Cent. 137 (Feb.) to 
162 (Aug.); Louis. & Nash. 121 (Jan.) to 162 
(Aug.); N. Y. Cent. 120 (Feb.) to 147 (Aug.); 
New Haven 174 (June) to 154 (Nov.); Pennsyl¬ 
vania 126 (Feb.) to 151 (Sept.); Pullman 169 
(Jan.) to 200 (Aug.). 

1910 AVERAGE 150-179 

Cent, of N. J. ranged from 312 (Jan.) to 248 
(July); St. Paul 158 (Jan.) to 114 (June); Del. & 
Hud. 185 (Jan.) to 149 (July); Gt. Northern *224 
(Jan.) to 163 (July); Ill. Cent. 147 (Jan.) to 124 

* These prices include the price of one Ore Certificate. 


RANGE OF STOCK MARKET 


49 


(July); Louis. & Nash. 160 (Jan.) to 132 (July); 
N. Y. Cent. 128 (Mch.) to 105 (July); New Haven 
162 (Mch.) to 149 (April); Pennsylvania 138 
(Mch.) to 122 (July); Pullman 200 (Jan.) to 155 
(June). 

1911 AVERAGE 147-163 

Cent, of N. J. ranged from 260 (Aug.) to 320 
(Dec.); St. Paul 134 (Feb.) to 106 (Oct.); Del. & 
Hud. 175 (June) to 160 (Sept.); Gt. Northern 
*203 (June) to 163 (Sept.); Ill. Cent. 132 (Jan.) to 
147 (July); Louis. & Nash. 136 (Sept.) to 161 
(Nov.); N. Y. Cent. 115 (Feb.) to 100 (Sept.); 
New Haven 151 (Feb.) to 127 (Sept.); Pennsyl¬ 
vania 130 (Feb.) to 119 (Sept.); Pullman 163 
(Jan.) to 154 (Sept.). 

1912 AVERAGE 157-170 

Cent, of N. J. ranged from 305 (Jan.) to 395 
(Apr.); St. Paul 99 (July) to 117 (Nov.); Del. & 
Hud. 175 (Feb.) to 162 (Dec.); Gt. Northern *165 
(Jan.) to 187 (Aug.); Ill. Cent. 141 (Jan.) to 120 
(May); Louis. & Nash. 170 (Aug.) to 138 (Dec.); 
N. Y. Cent. 121 (Apr.) to 106 (Dec.); New Haven 
142 (Apr.) to 126 (Dec.); Pennsylvania 126 (Oct.) 
to 119 (Dec.); Pullman 158 (Feb.) to 175 (Aug.). 

1913 AVERAGE 132-161 

Cent, of N. J. ranged from 362 (Jan.) to 275 
(June); St. Paul 116 (Jan.) to 97 (Nov. and Dec.); 
Del. & Hud. 167 (Jan.) to 148 (June); Gt. Northern 
plus 1 ore ctf. 174 (Jan.) to 141 (June); Ill. Cent. 
129 (Feb.) to 103 (Dec.); Louis. & Nash. 142 
(Jan.) to 126 (June); N. Y. Cent. 110 (Jan.) to 90 

* These prices include the price of one Ore Certificate. 


50 


BUSINESS BAROMETERS 


(Dec.); New Haven 130 (Jan.) to 66 (Dec.); Penn¬ 
sylvania 124 (Jan.) to 106 (Dec.); Pullman 165 
(Jan.) to 149 (Sept.). 

tl914 AVERAGE 128-145 

Cent, of N. J. ranged from 315 (Mar.) to 300 

(July); St. Paul 107 (Feb.) to 85 (Dec.); Del. & 

Hud. 160 (Feb.) to 139 (Dec.); Gt. Northern *173 
(Feb.) to 135 (Dec.); Ill. Cent. 115 (Jan. and Feb.) 
to 104 (Dec.); Louis. & Nash, 142 (Jan.) to 125 
(Dec.); N. Y. Cent. 97 (Jan.) to 77 (July); New 
Haven 78 (Jan.) to 50 (July); Pennsylvania 116 
(Jan.) to 103 (Dec.); Pullman 159 (Jan.) to 150 
(Dec.). 

1915 AVERAGE 129-146 

Cent, of N. J. ranged from 325 (Jan.) to 250 

(Sept.); St. Paul 78 (July) to 101 (Dec.); Del. & 

Hud. 138 (Aug.) to 154 (Nov.); Gt. Northern plus 
1 ore ctf. 138 (Jan.) to 181 (Nov.); Ill. Cent. 113 
(April )to 99 (July); Louis & Nash. 104 (July) to 
130 (Nov.); N. Y. Cent. 81 (Mch.) to 110 (Dec.); 
New Haven 43 (Feb.) to 89 (Oct.); Pennsylvania 
104 (Feb. and Mch.) to 122 (Nov.); Pullman 150 
(Mch.) to 170 (Oct.). 

1916 AVERAGE 135-144 

Cent, of N. J. ranged from 289 (Jan.) to 310 
(May and Dec.); St. Paul 102 (Jan.) to 89 (Dec.); 
Del. & Hud. 159 (Oct. and Nov.) to 150 (Dec.); 
Gt. Northern plus 1 ore ctf. 178 (Jan.) to 147 
(Dec.); Ill. Cent. 100 (Apr.) to 110 (Oct.); Louis. 
& Nash. 121 (Mar.) to 140 (Oct.); N. Y. Cent. 

* This price includes the price of one Ore Certificate, 
t The Exchange was closed from July to December, during which time 
the unofficial prices were quoted even lower than those named above. 


RANGE OF STOCK MARKET 


51 


100 (Apr.) to 116 (Oct.); New Haven 78 (Jan.) 
to 50 (Dec.); Pennsylvania 55 (Aug.) to 60 (Oct.); 
Pullman 160 (May) to 177 (Sept.). 

1917 AVERAGE 98-138 

Cent, of N. J. ranged from 277 (Dec.) to 302 
(Feb.); St. Paul 35 (Nov. and Dec.) to 92 (Jan.); 
Del. & Hud. 87 (Nov.) to 152 (Jan.); Gt. Northern 
plus 1 ore ctf. 79 (Dec.) to 118 (Jan.); Ill. Cent. 
86 (Dec.) to 106 (Jan.); Louis. & Nash. 103 (Dec.) 
to 134 (Jan.); N. Y. Cent. 63 (Dec.) to 104 (Jan.); 
New Haven 21 (Sept.) to 53 (Jan.); Pennsylvania 
40 (Dec.) to 57 (Jan.); Pullman 106 (Dec.) to 
168 (Jan.) 

1918 AVERAGE 104-118 

Cent, of N. J. ranged from 202 (Apr.) to 220 
(Nov.); St. Paul 37 (Apr.) to 54 (Sept.); Del. & 
Hud. 100 (Apr.) to 120 (Nov.); Gt. Northern plus 
1 ore ctf. Ill (Jan.) to 141 (Nov.); Ill. Cent. 92 
(Jan.) to 106 (Nov.); Louis. & Nash. 110 (Jan.) to 
125 (Nov.); N. Y. Cent. 68 (Jan. and Apr.) to 85 
(Nov.); New Haven 27 (Apr.) to 46 (May); 
Pennsylvania 87 (Dec.) to 100 (Nov.); Pullman 
100 (Jan.) to 132 (Nov.). 

1919 AVERAGE 86-107 

Cent, of N. J. ranged from 170 (Sept.) to 213 
(Aug.); St. Paul 34-(Dec.) to 53 (July); Del. & 
Hud. 92 (Dec.) to 116 (May); Gt. Northern plus 
1 ore ctf. 107 (Dec.) to 153 (May); Ill. Cent. 86 
(Dec.) to 104 (May); Louis. & Nash. 105 (Aug.) 
to 123 (May); N. Y. Cent. 67 (Dec.) to 84 (June); 
New Haven 25 (Dec.) to 41 (July); Penn. 40 


52 


BUSINESS BAROMETERS 


(Dec.) to 49 (May); Pullman 110 (Nov.) to 133 
(July). 

1920 AVERAGE 80-89 

Cent, of N. J. ranged from 175 (Jan. and Feb.) 
to 240 (Nov.); St. Paul 21 (Dec.) to 45 (Nov.); 
Del. & Hud. 83 (June) to 108 (Oct.); Gt. Northern 
plus 1 ore ctf. 95 (Dec.) to 127 (Mar.); Ill. Cent. 
81 (Feb.) to 95 (Nov.); Louis. & Nash. 94 (Aug.) 
to 113 (Jan.); N. Y. Cent. 64 (Feb.) to 84 (Nov.); 
New Haven 16 (Dec.) to 37 (Sept.); Penn. 38 
(May) to 44 (Oct.); Pullman 96 (Dec.) to 124 
(Mch.). 

1921 AVERAGE 76-94 

Cent, of N. J. ranged from 186 (Oct.) to 209 
(Mar.); St. Paul 17 (Dec.) to 31 (Jan.); Del. & 
Hud. 90 (Apr.) to 111 (Nov.); Gt. Northern plus 
ore ctf. 86 (June) to 113 (Dec.); Ill. Central 86 
(Mar.) to 101 (Nov.); Louis. & Nash. 97 (Apr.) 
to 118 (July); N. Y. Cent. 64 (June) to 76 (Dec.); 
New Haven 12 (Nov.) to 24 (Jan.); Penn. 32 
(June) to 42 (Jan.); Pullman 88 (Oct.) to 114 
(Nov.). 

1922 AVERAGE 85-109 

Cent, of N. J. ranged from 184 (Mar.) to 245 
(Oct.); St. Paul 17 (Jan.) to 36 (Aug.); Del. & 
Hud. 107 (Jan.) to 142 (Sept.); Gt. Northern plus 
1 ore ctf. 98 (Jan. and Nov.) to 141 (Oct. and Apr.); 
Ill. Cent. 98 (Jan.) to 116 (Sept.); Louis. & Nash. 
108 (Jan.) to 140 (Sept.); N. Y. Cent. 73 (Jan.> 
to 101 (Oct.); New Haven 31 (Jan.) to 38 (Aug.); 
Penn. 33 (Jan.) to 50 (Oct.); Pullman 106 (Jan.) 
to 140 (Sept.). 


POSSIBILITIES OF PROFIT 


53 


Possibilities of Profit in Conservative 
Stocks 


Suppose $2,500 in 1861 had been put in the 
stocks given in the preceding pages, and they had 
been bought and sold again, every three or four 
years, what would have been the history of that 
$2,500? To what would it have amounted today? 

In detail the answer, would be as follows: Start¬ 
ing in 1861 with an original principal of $2,500, the 
dividends for three and one-half years at 5% 
amount to $705. Assume that we invest the 
$2,500 in the leading stocks of 1861 at their average 
low price (as given in the preceding chapter) of 62, 
and hold the stocks for said three and one-half 
years until the average price reaches 150 in 1865, 
when we sell for $6,448, which, together with the 
interest above mentioned, makes a total of $7,153. 
We leave this amount on deposit in a bank for two 
years at 4%, so that we have $7,737 to invest in 
1867 when the average again falls to 100. We 
believe that with this introduction the table is 
self-explanatory. 


Original Principal invested 

@62. 

Dividends yrs. @ 5% to 
Princ. bought @ 62-1861, 

sold @158. 

Total Princ. & Dividends. 
Comp. Int. @ 4% 2 yrs. 

Princ. & Int. to. 

Invested @ 100 in 1867. . . 
Dvidends 2 yrs. @ 5% to 
Princ. bought @ 100-1867 

sod @ 144. 

Total Princ. & Div. @5% 


1861 

1865 

$705 

$2,500 

1865 

1865 

6,448 

7,153 

1867 


7,737 

1869 

773 


1869 

11,131 

11,904 







54 


BUSINESS BAROMETERS 


Comp. Int. @ 4% 4 yrs. 

Princ. & Int. 

Invested @ 75 in 1873.... 
Dividends 1 yr. @ 5% to.. 
Princ. bought @ 75 in 1873 

sold @ 100. 

Total of Princ. & Dividends 

©5% to. 1874. 

Comp. Int. @ 4% 3| yrs. 

Princ. & Int. 

Invested @ 55 in 1877.... 
Dividends 4 yrs. @ 5% to 
Princ. bought @ 55 in 1877 

sold @ 134. 

Total Princ. & Dividends 

@ 5 % 1881. 

Comp. Int. @ 4% 3§ yrs. 

(June) 1881. 

Princ. & Int. to Jan. 

Invested @ 86 in 1885.... 
Dividends 4 yrs. 9 mos. @ 

5% to Sept. 

Princ. bought © 86-1885 

sold @136. 

Total of Princ. & Div. @ 


Comp. Int. @ 4% 1 yr. 10 
mos. to July 31, 1891... 

Princ. & Int. 

Invested @ 115 in 1891.. . 
Dividends 1 yr. @ 5% to . 
Princ. bought @ 115 in 

1891 sold @ 135 in. 

Total of Princ. & Div. @ 

5%.•. 

Comp. Int. @ 4% 4 yrs.. . 

Princ. & Int. to. 

Invested @ 100 in 1896.. . 
Dividends 6 yrs. @ 5% to 
Princ. bought @ 100 in 

1896 sold @ 190 . .. 

Total Princ. & Dividends 

©5%. 

Comp. Int. @ 4% 1 yr.. . . 

Princ. & Int. to Oct. 

Invested @ 146 in 1903.. . 
Dividends 2 yrs. 3 mos. @ 
5% to. 


1873 


$13,926 

1874 

$928 


1874 

18,560 

19,488 

1877 


22,360 

1881 

8,130 


1881 

54,471 ' 

62,601 

1885 


71,825 

1889 

19,836 


1889 

113,587 


1889 


133,423 

1891 


143,385 

1892 

6,235 


1892 

168,345 


1892 


174,580 

1896 


204,234 

1902 

61,269 


1902 

388,037 


1902 


449,306. 

1903 


467,278 

1906 

36,005 





















POSSIBILITIES OF PROFIT 


55 


Princ. bought @ 146 in 
1903 sold @ 205 during 
Jan. 

1906 . 

$656,102 

Total of Princ. & Div. @ 
5 % . 

1906 

Comp. Int. @ 4% 1 yr. 9 

mos. to Nov. 1907. 

Princ. & Int. 

1907 


Invested @ 119 in 1907... 
Divs. 1 yr. 8 mos. @ 5% to 
Aug. 

1909 

61,780 

Princ. bought @ 119 in 
1907 sold @ 190 in Aug* 

1909 

1,183,694 

Total Princ. & Divs. @ 5 % 
through Aug. 

1909 

Comp. Int. @ 4% 5 yrs. 3 
mos. to Dec. 

1914 


Princ. & Int. 

Invested @ 128.3 in Dec.. 

1914 


Divs. 1 yr. 10 mos. @ 5 % 
to Oct.. 

1916 

141,226 

Princ. bought @ 128.3 in 
1914 sold @ 144 in Oct. 

1916 

1,733,258 

Total Princ. & Div. @5% 
through Oct. 

1916 

Comp. Int. @ 4% 14 mos. 
to Dec. 

1917 

88,225 

Princ. & Int. in Dec. 

1917 

Invested @ 98 in Dec. 

1917 


Divs. 11 mos. @ 5% to 
Nov. 

1918 

89,957 

Princ. bought @ 98 in 1917 
sold @ 118 in Nov. 

1918 

2,363,298 

Total Princ. & Div. @ 5 % 
through Nov. 

1918 


Comp. Int. @ 4% 2 yrs. 7 
mos. to June. 

1921 

259,423 

Princ. & Int. in June. 

1921 


Invested @ 76 in June .. . 

1921 


Divs. 3 yrs. 4 mos. @ 5 % 
to June. 

1923 

452,095 


$692,107 

741,384 


1,245,474 

1,540,674 


1,874,484 * 
1,962,709 


2,453,255 


2,712,678 




















56 


BUSINESS BAROMETERS 


In the foregoing table 5% is allowed as an aver¬ 
age dividend on the stocks held and 4% an average 
interest on bank deposits or the highest grade com¬ 
mercial paper. The average prices at which the 
purchases and sales are executed are the “ aver¬ 
ages ” at the beginning of each of the paragraphs 
above on general stock prices. 

The preceding example shows that $2,500 con¬ 
servatively invested in a few standard stocks about 
sixty years ago would today amount to about 
$3,000,000. These are not only strictly dividend 
paying stocks (with the exception of two in the 
last ten years) but are also stocks which have 
fluctuated comparatively little in price. This, 
moreover, was possible by giving orders to buy or 
sell only once in every three or four years. 

If the investor can increase an investment of 
$2,500 to $1,000,000 in about fifty years without 
taking any undue risk he should be satisfied, and 
should not for the sake of obtaining greater profits 
assume any additional risks. With this serving as 
a simple illustration of how money can be made by 
studying statistics, the following (from a letter 
written by the manager of a Stock Exchange House) 
is of interest as an illustration of the other side: 

“ Hearing on every hand about the fortunes 
made in Wall Street, I decided, upon being gradu¬ 
ated from college, to devote myself to finance. 
With this end in view, I secured a position with a 
first-class New York Stock Exchange House, finally 
becoming the ‘ handshaker ’ for the firm — that is, 
‘ manager ’ of the customers’ room. So I had an 


POSSIBILITIES OF PROFIT 


57 


exceptional opportunity to size up the stock busi¬ 
ness. The chief duties of the manager are to meet 
customers when they visit the office, tell them how 
the market is acting, the latest news from the news- 
tickers and the gossip of the Street. But the real 
■duties are to get business for the house. Once a 
most peculiar man came to the office. He was 
about forty-five years of age, dressed in a faded 
cutaway coat, high-water trousers, and an East 
Side, low-crown derby hat. In a high, squeaky 
voice he said that he knew our Milwaukee house 
and would like to open an account. Of course, we 
were all smiles, for here was a new 1 customer/ 

“ One day while in Boston he called us up on 
the long-distance telephone to make an inquiry 
about the grain market. One of my assistants, 
desiring to get a commission out of him, said, ‘ We 
hear that Southern Pacific is going up; you had 
better get aboard/ He answered, ‘ All right; buy 
me a hundred at the market/ The stock was 
bought, but he never saw’daylight on his purchase, 
for the market declined steadily afterward, and by 
the time he got back from Boston it showed a 
heavy loss. The man who had advised its pur¬ 
chase had no special knowledge about the stock, 
but simply took a chance, knowing that the market 
had only two ways to go, and it ‘ might ’ go up, in 
which case, besides making twenty-five dollars in 
commissions for the house, he would be patted on 
the back for his good judgment. If the market 
went down, as it did, he would still make twenty- 
five dollars. 


58 


BUSINESS BAROMETERS 


“ I venture to say that 99% of the speculations 
on the New York Stock Exchange are based on 
such so-called ‘ tips.’ The manager has got to get 
the business to keep his position and salary, and 
this can only be done by ‘ touting ’ people into the 
market. So he draws on the ‘ dope ’ sheets of the 
professional tipsters and his own feelings, and gives 
positive information to the bleating lamb that the 
Standard Oil is putting up St. Paul, or that certain 
influential bankers are ‘ bulling ’ Union Pacific. 
The lamb buys the stock, the broker gets the com¬ 
mission, and then the lamb worries his heart out 
as he sees his one-thousand-dollar margin jumping 
around in value. Now it has increased to eleven 
hundred dollars, then declined to nine hundred and 
fifty dollars, then nine hundred dollars, eight hun¬ 
dred dollars, and then back to eight hundred and 
fifty dollars, and then it takes the ‘ toboggan ’ to 
three hundred dollars, upon which the broker calls 
for margins, and sells the customer out if they are 
not forthcoming, the whole speculation being 
based on the manager’s * feeling ’ that stocks ought 
to go up. 

11 Men of affairs who will not play poker at home, 
and are shocked at the mention of faro and roulette, 
which any old-timer will tell you are easier to beat 
than the stock market, think they are using busi¬ 
ness judgment when they try to make money on 
stock market ‘ tips.’ Anyone with common sense 
can see that a 10% margin has no more chance in 
an active market than a brush dam in a Johnstown 
flood. One of the causes for this kind of speculat- 


POSSIBILITIES OF PROFIT 


59 


ing on a margin is that a broker’s commission is 
only 15 cents per share, and it does not pay to do 
small-lot business. The one-thousand-dollar mar¬ 
gin would only buy ten shares outright and net the 
broker but $1.50 for buying and $1.50 for selling, 
whereas that same amount as margin on one hun¬ 
dred shares yields the broker $15.00 each way, 
besides interest on the balance, the net result being 
that for any given anlount of money a speculator 
on 10% margin multiplies his profits by ten and 
his losses by ten over those that would occur were 
he to buy the stock outright and take it home. 
The broker on his side multiplies his commission by 
ten over what he would receive were he to do an 
investment business.” 

For further proofs as to the foolhardiness of the 
average so-called “ investor ” in stocks, see the 
series of articles in Everybody’s Magazine that 
appeared during the spring of 1909. Such a method 
of buying and selling stock is absolutely unreliable; 
and unless men are willing to spend money for 
fundamental statistics, they should purchase no 
listed securities, but confine their purchases to in¬ 
active bonds recommended by high-grade bond 
houses. On the other hand, it is possible to create 
a fortune by the method that is herein outlined, 
although it is practically the only method which 
can be depended upon. It is also the most prof¬ 
itable, as all other methods come under the head of 
“ accumulation by arithmetical progression ” rather 
than “ accumulation by geometrical progression.” 

In order to increase an investment of $5,000 to 


60 


BUSINESS BAROMETERS 


$1,000,000 in thirty years by any other method, 
a man must accumulate about $25,000 a year, or 
$100,000 continually every four years, without a 
break. This is almost an impossibility so far as 
the average man is concerned and the feat is simply 
made greater or less in direct proportion to the 
amount. That is, to build up a fortune of $200,000 
requires a laying aside of several thousand dollars 
every year in addition to allowing all interest to 
accumulate; while to create a fortune of several 
millions requires that one should make, exclusively 
in his business, more money each year than almost 
any one man in the entire world {who holds no 
stocks or bonds) is making in his business. 

This can best be illustrated as follows: If one 
has $1,000 invested in only ten shares of stock, it 
does not seem very wonderful for it to double in 
value in three or four years, enabling its sale for 
$2,000, which is at a profit of $1,000. This is due 
to the fact that one is accustomed to the thought 
of handling $1,000; yet with $100,000 in the same 
stock, it would just as surely become $200,000, 
giving a profit of $100,000. 

In other words, at the beginning there is little 
difference between “ Arithmetical ” and “ Geo¬ 
metrical ” Progression, as $1,000 added to $1,000 
amounts to $2,000, the same as if multiplied by 
two. After accumulating $100,000, however, it 
makes a tremendous difference whether one adds 
$1,000, making the amount $101,000, or multiplies 
said amount by two, making the amount $200,000. 
It is for this reason that it is not only possible to 


POSSIBILITIES OF PROFIT 


61 


create a great fortune through conservative invest¬ 
ments, but this is the safest way it can be accomplished. 


Range of Movement in Bond Prices 

For the benefit of readers who confine their pur¬ 
chases strictly to bonds, the following tables will 
be found of great interest. Although bonds do not 
present nearly as great an opportunity for profit 
as stocks, yet it will be seen that there is often an 
opportunity of obtaining an average profit of from 
10% to 20% in addition to the interest received. 

From every point of view a study of these tables 
clearly shows that the study of fundamental sta¬ 
tistics is of great value even to the banker or in¬ 
vestor who purchases only bonds. If he buys with 
the idea of selling again, a study of fundamental 
statistics is absolutely essential. If one buys for 
permanent investment only, the study is not es¬ 
sential; but by showing a purchaser when to buy, 
fundamental statistics will save him an average of 
about 12% on all purchases. In order that the 
reader may not think that these tables were pre¬ 
pared by us merely in the interests of the study 
of fundamental statistics we take pleasure in stat¬ 
ing that they were prepared by a leading New York 
investment house, whose natural object would be to 
show that bonds fluctuate very little. It, how¬ 
ever, will be seen that bonds have their normal 
price line as well as stocks. Every abnormal 
action away from this line, is followed by an equal 
reaction on the other side. 


PANIC OF 1884 

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From these tables it will be seen that there is an average fluctuation of about 15% every five or six years, or 
about 3% for each year. As these bonds yield about 5% when purchased during panics, this makes a total aver¬ 
age yield of about 8%. Now, $5,000 at 8% compound interest becomes over $68,000 in about 40 years, and 
$10,000 becomes about $50,000 in only about 20 years. This shows how rapidly money can be multiplied by the 
use of fundamental statistics, even though one’s investments are in high grade bonds. 




68 


BUSINESS BAROMETERS 


As some readers will say, “ These figures are all 
very well, but one might have bought some securi¬ 
ties which defaulted.” The following tables, pre¬ 
pared by Mr. J. D. Evans and which appeared in 
one of the many valuable financial articles pub¬ 
lished by the Van Norden Magazine, are extremely 
instructive. Of course, one may invest in new 
schemes and lose all the money invested; but if 
one will confine his investments to securities of 
established railroads, he has nothing to fear from 
reorganizations. The Law of Equal Action and 
Reaction will protect him. 

Without any noteworthy exceptions the reor¬ 
ganizations have been carried out with the intention 
of placing the companies in a position of solidity 
and strength with respect to their fixed obligations, 
on the low basis of business as it existed at that 
time. To accomplish this the stockholders and 
owners of the junior securities of the bankrupt 
companies were induced to forego a large part of 
their immediate income from their investments and 
take their chances of larger returns with the growth 
of the companies. With the object of making these 
chances as bright as possible the reorganization 
committees were almost invariably quite liberal to 
the holders of such obligations in their allotment 
of new securities, especially to such of the old 
holders as paid the assessments necessary to pro¬ 
vide the new capital required. 

In the tables presented no attempt is made to 
include all possible obligations of all reorganized 
companies. No one would be justified in pretend- 


REORGANIZATIONS 


69 


ing that absolutely exact general conclusions can be 
arrived at from any statistical tables made up in a 
study of reorganizations, since no two bonds issued 
under different indentures are exactly alike. There¬ 
fore, only a few typical representatives of the various 
kinds of bond issues affected by reorganizations are 
grouped together in the main table and these are 
then segregated into smaller groups including se¬ 
curities as nearly in the same class as possible. 
Such general conclusions, arrived at as a result of 
such a plan, are, however, more valuable than they 
would be in the other case, inasmuch as typical se¬ 
curities of typical companies have been taken, repre¬ 
senting all parts of the country. Says Mr. Evans: 

“ The conservative investor who makes it a 
practice to buy only the best class of first mortgage 
bonds with the purpose of insuring the safety of 
his principal and the continuity of his income, 
needs only the most casual acquaintance with the 
outcome of reorganizations to convince him that 
he has plenty of proof that his stand is a wise one. 
By far the larger proportion of first lien bonds were 
not disturbed at all either in their lien or rate of 
interest. In reality their position was greatly 
strengthened by the financial readjustment and the 
accretion of fresh capital to assure the continuance 
and success of the company on whose property they 
had a prior lien. The fact that there are still out¬ 
standing a considerable number of old underlying 
bonds of reorganized companies selling at premiums 
ranging from 10% to 30% or 40% is the best evi¬ 
dence of this.” 


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76 


BUSINESS BAROMETERS 


“ There were a few prior mortgage bonds which 
had their interest rate reduced while otherwise un¬ 
disturbed, but the best grade bonds that were 
disturbed fared approximately as indicated in 
Table B. As shown in Table B, the principal on 
the old first mortgage bonds disturbed was not 
only conserved but increased an average of 33.3% 
as compensation for a reduction in the return on 
each dollar. This in itself has been a decided ad¬ 
vantage inasmuch as the old mortgages, if they had 
been left to mature, would, at maturity, be re¬ 
deemed at par or extended on a basis of 4% or less, 
whereas the average holder of old disturbed firsts, 
now has well secured principal greater by 33.3%, 
the whole probably yielding him a 4% rate. 

“ This outcome places him on a level with the 
holder of an undisturbed first mortgage having a 
high rate of interest and a long period to run which 
on account of the subsequent enhancement of the 
credit of the company commands a price of 133.3%. 
The table also shows that the average reduction in 
immediate return on the bonds included was very 
slight, being only from an average return of 5.1% 
to 4.997%. The rate later increased to 5.097% 
and with a fair prospect that later it might attain 
to an appreciably higher figure. 

“ Thus the buyer of the first mortgages found 
himself more than justified in his practice, in that 
the average holder, instead of merely conserving 
his principal, received a new principal 133.3% of 
the old, and although the return was cut down at 
first, the cut was very slight, and after a compara- 


REORGANIZATIONS 


77 


tively few years, the return was restored to about 
the original rate with every reasonable prospect of 
eventually becoming greater. 

“ Of the second, third or fourth grade bonds 
secured on main properties or low grade divisional 
and branch line bonds, which follow in their re¬ 
spective tables, each class received a correspond¬ 
ingly severe cut in both their immediate and 
prospective return. Some typical miscellaneous 
bonds fared as shown in Table G. 

“ It might be laid down as a general rule that 
Equipment Trust mortgages were always favorably 
treated. The treatment of Collateral Trust bonds, 
of course, varied materially, depending on the 
quality of the collateral pledged. Yet, it is inter¬ 
esting to observe, in view of the recent adverse 
discussion of bonds secured by pledge of collateral, 
that the great majority of bonds of that class were 
either paid off at par and all accrued interest either 
by the new company directly, or as a result of the 
liquidation of the pledged collateral, or were given 
new securities to full amount of principal, the in¬ 
come from which represented a reduction of only a 
small proportion of the old income.” 

That this was the case was nothing short of re¬ 
markable considering the depression in the prices 
of all securities at that time and the difficulty of 
obtaining any market for even the best of bonds or 
stocks. Here again we see the workings of the in¬ 
evitable Law of Equal Reaction. If we err, we 
cannot avoid the consequences. If we do right, we 
are sure to profit by it. 


78 


BUSINESS BAROMETERS 


The average non-mortgage debenture or the 
average terminal bond probably fared as per 
Table G, with a preference in favor of terminal 
bonds. To ,the more speculative investor also, 
whose preference runs to stocks, the outcome of 
reorganizations should be of interest. There is 
much in the subjoined table (H) well worth notice 
both as calling attention to the success attending 
the subsequent development of the reorganized 
companies and as a commentary on the actual 
prosperity enjoyed by the companies in the period 
elapsed since 1896 — a prosperity perhaps beyond 
all expectations of even the reorganizers. 

Table H indicates very clearly that the average 
return on most junior securities issued shows a 
rate of return on the par value of the old junior 
securities which approximates, very closely at the 
present time, and promises soon to equal and even¬ 
tually far to exceed the return on the original par 
value of the very best grade of bonds. The signifi¬ 
cance of this is enhanced when we recollect that 
whereas the old first mortgage bonds probably re¬ 
mained at a price which averaged near par even 
when in default, and could probably never have 
been purchased by the investor at much less than 
that figure, the stocks of the old companies prob¬ 
ably had an average price for a considerable time 
before reorganization of not over 50%, and for a 
very long time many sold as low as 10%, so that 
a purchaser who bought those securities at those 
prices and held the new securities issued in ex¬ 
change, is actually receiving from two to ten times 


REORGANIZATIONS 


79 


more return on his investment than an investor 
in the old first mortgage bonds. This outcome 
was, of course, preceded by a period in which there 
was practically no return, but that period was very 
short. 

The table on the following page, summarizing 
the tables already given, is appended for the pur¬ 
pose of giving the reader a more ready comparison. 

There is still another lesson to be learned from 
these tables which should be most carefully remem¬ 
bered by such as look down upon the principle of 
buying and selling every one to four years, outlined 
in this book. We refer to the fact that those most 
“ conservative ” investors and trustees, who buy 
only for permanent investment, can still well afford 
to study fundamental statistics. 

Whether or not they ever intend to sell, they 
should confine their buying to times when funda¬ 
mental statistics show that underlying conditions 
are becoming sound. This last is very important, 
as it is a great mistake to buy simply because prices 
are low. 

Investors, if students of fundamental statistics, 
can well afford to purchase defaulted bonds and 
other securities of established railroads in the proc¬ 
ess of reorganization and make tremendous profits 
thereby, provided they are willing to study funda¬ 
mental statistics, or, to state it in another way, 
they can purchase at 50, bonds which, during 
normal times after the reorganization is completed, 
they would otherwise purchase at 110. They 
should, however, be careful not to purchase securi- 




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REORGANIZATIONS 


81 


ties of companies which will soon have to go through 
a reorganization, just because these securities are 
selling low. The better way, as above suggested, is 
to wait until the reorganization is in force and then 
to purchase only after a careful investigation. 

The keenest investors — depending upon the Law of 
Equal Reaction — systematically sell their invest¬ 
ments in old companies and reinvest the proceeds in 
reorganized companies. The old saying that it is 
only three generations from “ shirt sleeves to shirt 
sleeves ” seems to apply to investments. What is best 
today is likely to be the poorest tomorrow , and vice 
versa. 


CHAPTER III 


RANGE OF COMMODITY MARKET SINCE 1860, 
SHOWING THE POSSIBILITIES OF PROFIT 
SPECIAL TABLES ON COMMODITY PRICES' 


A KNOWLEDGE of Fundamental Statistics 
is as important to merchants and manufac¬ 
turers as to investors. The commodity 
market offers almost as great an opportunity for 
profit as the stock market. Capital invested in 
commodities should not depend upon chance for its 
development. To the merchant or anyone else 
interested wholly or in part in the price movement 
of crops, manufacturers, raw material or merchan¬ 
dise, general figures on underlying conditions, con¬ 
trolling demand and supply, are esssential. 

To know when to buy and when to sell commodi- 
tied, in order to take advantage of the larger swings 
of the market, the merchant must know what the 
present conditions are and which way the pendu¬ 
lum is swinging. To know how soon to curtail 
credits extended to customers, and acquire the cash 
needed to save his credit, when loans cannot easily 
be renewed, he must watch the Babsonchart. 
Keeping his eyes only on the details of his own 
business will not enable him to avoid “ hard times.” 
Moreover, by broadening his study he is able 
greatly to increase his profits, as well as to eliminate 
losses. 

The study of twenty-five important factors like 
those described in subsequent chapters of this book 







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RANGE OF COMMODITY MARKET 


83 


by methods similar to those there outlined, results 
in the perception of clearly defined industrial 
movements in the past and shows the bearing these 
factors are having today in commerce and industry, 
as well as on the monetary and stock market out¬ 
look. Great fortunes have been made, the history 
of which reveals the fact that their possessors had 
a very accurate knowledge of approaching condi¬ 
tions, because of a keen understanding of funda¬ 
mental statistics. 

As an illustration of possible profits that can be 
made simply by the purchase and sale of commodi¬ 
ties in connection with a study of Fundamental 
Statistics, the following example is submitted. 
Starting with a capital of a little over fifty thousand 
dollars, ten commodities were selected for purchase. 
Bought first in 1860, they were sold and bought 
again at intervals of from three to seven years, 
according to what the figures on “ underlying 
conditions ” indicated. The prices used are those 
given in the closing paragraphs of this chapter and 
no departure from the years selected was made, 
except where there was a choice of either of two 
years. In such cases, it was assumed that the 
purchaser would buy later, sell earlier, or leave 
more cash on deposit as the conditions warranted. 
The original proportion of the different articles 
has been kept the same; and the interest, added 
to the principal on deposit in the intervals between 
selling and buying, has been reckoned at 4%. 
Since all commodities are not affected alike by the 
same conditions, slight losses were allowed to occur 


84 


BUSINESS BAROMETERS 


as they would naturally. The resulting amount 
shows that in about sixty years $54,931 becomes 
about $3,500,000; or that $1,000,000 would be¬ 
come $65,000,000. This clearly demonstrates that 
even the great mercantile fortunes have been 
acquired by taking advantage of the same laws 
and changes that give opportunities of profit to 
the banker and the investor. 

EXAMPLE ILLUSTRATING PROFITS DERIVED 
FROM TRANSACTIONS IN COMMODITIES 
USING FUNDAMENTAL STATISTICS AS A 
GUIDE IN BUYING AND SELLING, 1860 TO 
1923. 

Basis, original quantities: 1,000 tons iron; 5,000 
bushels wheat; 5,000 bushels corn; 10,000 lbs. 
cotton; 10,000 lbs. sugar; 10,000 lbs. wool; 10,000 
lbs. coffee; 1,000 lbs. rubber; 500 barrels pork; 
10,000 lbs. copper. After the first transaction 
these quantities were multiplied by the numbers 
shown in the parentheses. 

PRICES SAME AS IN TABLES FOLLOWING 


Original purchase 1860. $54,931.00 

First sale 1864. 130,476.25 

Capital on dep. 4 yrs. @ simp. int. P. & I. to 

1869. 151,352.45 

Second purchase 1869 (1.8 X orig. quan.). 150,737.85 

Remaining capital. 614.60 

Second sale 1872 (1.8 X orig. quan.). 153,194.40 

Capital plus 5 yrs. int. and remaining capital 

& int. to 1878. 184,669.1*4 

Third purchase 1878 (4.46 X orig. quan.). 184^554.80 

Remaining capital. 114.34 

Third sale 1882 (4.46 X orig. quan.). 261,547.78 

Proceeds of third sale on dep. 2 yrs. 282,471.60 

Remaining capital & int. on dep. 7 yrs. . . . 146.36 

Total capital 1885. 282,617.96 












RANGE OF COMMODITY MARKET 85 

Fourth purchase 1885 (7.19 X orig. quan.) $282,610.14 

Remaining capital. 7.82 

Fourth sale 1887 (7.19 X orig. quan.). 349,574.21 

Proceeds of 4th sale on dep. 8 yrs. to 1896. 461,437.96 

Remaining capital on dep 11 yrs. to 1896. 11.26 

Total capital 1896. 461,449.22 

Fifth purchase 1896 (15.3 X orig. quan.) . 459,872.10 

Remaining capital. 1,577.12 

Fifth sale 1902 (15.3 X orig. quan.). 697,914.09 

Proceeds of 5th sale on dep. 1 yr. to 1904. . 725,830.65 

Remaining capital & int. to 1904. 2,081.80 

Total capital 1904. 727,912.45 

Sixth purchase 1904 (18 X orig. quan) . . . 727,875.00 

Remaining capital. 37.45 

Sixth sale 1907. 892,913.40 

Proceeds of 6th sale plus capital and int. on 

remaining capital to 1908. 892,956.84 

Seventh purchase 1908 (20.9 X orig. quan.) 891,281.55 

Remaining capital. 1,675.29 

Seventh sale 1910. 1,000,483.00 

Proceeds of 7th sale on dep. 3 yrs. to 1914 1,120,540.96 

Remaining capital. 2,010.35 

Total capital 1914. 1,122,551.31 

Eighth purchase 1914 (26.2 X orig. quan.) 1,119,630.80 

Remaining capital. 2.920.51 

Eighth Sale 1917 . 2,132^418.50 

Proceeds 8th sale plus remaining capital 

and int. to April, 1917. 2,132,768.96 

Capital on dep. 4 yrs. 4 mos. @ simp. int. to 

August, 1921. 2,502,442.00 

Ninth purchase 1921 (45 X orig. quan.).. . 2,492,746.00 

Remaining capital. 9,696.00 

Ninth sale March, 1923. 3,564,787.00 






















86 


BUSINESS BAROMETERS 


When one realizes that if a capital of $50,000 
could have been increased to about $900,000 in less 
than fifty years, simply by a study of fundamental 
statistics and without borrowing any money or 
purchasing any but suitable commodities, the great 
value of this subject to the merchant becomes evi¬ 
dent. This, moreover, can be accomplished with¬ 
out any salesman, overhead charges, or other 
expenses. If to these figures we should add the 
natural profit derived from buying at wholesale 
and selling at retail, or an average manufacturing 
profit, the $50,000 would become nearly $20,000,- 
000. Thus a capital of $2,500 would accrue to 
over $1,000,000 by combining either the manufac¬ 
turer’s or retailer’s profit with a knowledge of 
fundamental statistics. 

In addition to the value of Fundamental Statistics 
for determining the trend of demand , supply and 
prices , they are of even more value for determining the 
amount of credit which manufacturers and merchants 
should at any time extend to customers; hut as their 
use in connection with “credits” is so well understood, 
no detailed explanation is given in this hook. 

PRICES OF TEN STAPLE COMMODITIES 
AVERAGE WHOLESALE PRICE FROM 1860-1922 

1860 

Wheat $1.37 per bu.; corn $0.73 per bu.; cotton 
$0.11 per lb.; sugar $0.0988 per lb.; wool $0.55 
per lb.; iron $22.70 per ton; copper $0.2287 per lb.; 
rubber $0.55 per lb.; pork $20.00 per bbl.; coffee 
$0.1306 per lb. 


RANGE OF COMMODITY MARKET 


87 


1861 

Wheat $1.30 per bu.; corn $0.60 per bu.; cotton 
$0.1301 per lb.; sguar $0.08f per lb.; wool $0.38 
per lb.; iron $20.26 per ton; copper $0.2225 per lb.; 
rubber $0.55 per lb.; pork $21.00 per bbl.; coffee 
$0.1275 per lb. 

1862 

Wheat $1.28 per bu.; corn $0.59J per bu.; 
cotton $0.3129 per lb.; sugar $0.1 If per lb.; wool 
$0.48 per lb.; iron $23.92 per ton; copper $0.2187 
per lb.; rubber $0.48 per lb.; pork $15.34 per bbl.; 
coffee $0,205 per lb. 

1863 

Wheat $1.16 per bu.; corn $0.84 per bu.; cotton 
$0.6721 per lb.; sugar $0.14f per lb.; wool $0.75 
per lb.; iron $35.24 per ton; copper $0.3387 per lb.; 
rubber $0.87f per lb.; pork $18.50 per bbl.; coffee 
$0.2965 per lb. 

1864 

Wheat $2.01 per bu.; corn $1.44f per bu.; cotton 
$1,015 per lb.; sugar $0.25% per lb.; wool $1.00 
per lb.; iron $59.22 per ton; copper $0.47 per lb.; 
rubber $0.80 per lb.; pork $44.00 per bbl.; coffee 
$0.3775 per lb. 

1865 

Wheat $2.04 per bu.; corn $1.26f per bu.; cotton 
$0.8338 per lb.; sugar $0.21f per lb.; wool $0.75 
per lb.; iron $46.08 per ton; copper $0.3925 per lb.; 
rubber $1.20 per lb.; pork $38.00 per bbl.; coffee 
$0.2537| per lb. 


88 


BUSINESS BAROMETERS 


1866 

Wheat $2.20 per bu.; corn $0.90 per bu.; cotton 
$0,432 per lb.; sugar $0.16| per lb.; wool $0.70 per 
lb.; iron $46.84 per ton; copper $0.3425 per lb.; 
rubber $1.00 per lb.; pork $34.00 per bbl.; coffee 
$0.1718 per lb. 

1867 

Wheat $3.33 per bu.; corn $1.21 per bu.; cotton 
$0.3159 per lb.; sugar $0.15J per lb.; 'wool $0.55 
per lb.; iron $44.08 per ton; copper $0.2537 per lb.; 
rubber $0.65 per lb.; pork $24.50 per bbl.; coffee 
$0.16 per lb. 

1868 

Wheat $2.43 per bu.; corn $1.23 per bu.; cotton 
$0.2485 per lb.; sugar $0.16| per lb.; wool $0.46 
per lb.; iron $39.25 per ton; copper $0.23 per lb.; 
rubber $0.67^ per lb.; pork $30.00 per bbl.; coffee 
$0,115 per lb. 

1869 

Wheat $1.50 per bu.; corn $1.02J per bu.; cotton 
$0.2901 per lb.; sugar $0.16% P er lb.; wool $0.48 
per lb.; iron $40.61 per ton; copper $0.2425 per lb.; 
rubber $0.82 per lb.; pork $34.00 per bbl.; coffee 
$0.0931 per lb. 

1870 

Wheat $1.30 per bu.; corn $1.02 per bu.; cotton 
$0.2398 per lb.; sugar $0.1351 per lb.; wool $0.46 
per lb.; iron $33.23 per ton; copper $0.2118 per lb.; 
rubber $1.00 per lb.; pork $30.50 per bbl.; coffee 
$0.10 per lb. 


RANGE OF COMMODITY MARKET 


89 


1871 

Wheat SI.60 per bu.; corn $0.77 per bu.; cotton 
SO. 1695 per lb.; sugar $0.1312 per lb.; wool $0.62 
per lb.; iron $35.08 per ton; copper $0.2412 per lb.; 
rubber $1.00 per lb.; pork $23.00 per bbl.; coffee 
$0.1375 per lb. 

1872 

Wheat $1.62 per bu.; corn $0.70 per bu.; cotton 
$0.2219 per lb.; sugar $0.1237 per lb.; wool $0.72 
per lb.; iron $48.94 per ton; copper $0.3556 per lb.; 
rubber $0.72 \ per lb.; pork $16.00 per bbl.; coffee 
$0.1631 per lb. 

1873 

Wheat $1.76 per bu.; corn $0.63 per bu.; cotton 
$0.2014 per lb.; sugar $0.1136 per lb.; wool $0.50 
per lb.; iron $42.79 per ton; copper $0.28 per lb.; 
rubber $0.74 per lb.; pork $18.00 per bbl.; coffee 
$0.1862 per lb. 

1874 

Wheat $1.39 per bu.; corn $0.86 per bu.; cotton 
$0.1795 per lb.; sugar $0.1050 per lb.; wool $0.53 
per lb.; iron $30.19 per ton; copper $0.22 per lb.; 
rubber $0.75 per lb.; pork $24.75 per bbl.; coffee 
$0.2625 per lb. 

1875 

Wheat $1.33 per bu.; corn $0.84 per bu.; cotton 
$0.1546 per lb.; sugar $0.1061 per lb.; wool $0.52 
per lb.; iron $25.53 per ton; copper $0.2268 per lb.; 
rubber $0.58J per lb.; pork $23.50 per bbl.; coffee 
$0.1806 per lb. 


90 


BUSINESS BAROMETERS 


1876 

Wheat $1.35 per bu.; corn $0.62f per bu.; cotton 
$0.1298 per lb.; sugar $0.1051 per lb.; wool $0.38 
per lb.; iron $22.19 per ton; copper $0.21 per lb.; 
rubber $0.64 per lb.; pork $22.75 per bbl.; coffee 
$0,175 per lb. 

1877 

Wheat $1.63 per bu.; corn $0.59^ per bu.; cotton 
$0.1182 per lb.; sugar $0.1073 per lb.; wool $0.50 
per lb.; iron $18.92 per ton; copper $0.19 per lb.; 
rubber $0.58 per lb.; pork $17.95 per bbl.; coffee 
$0.1943 per lb. 

1878 

Wheat $1.24 per bu.; corn $0.53J per bu.; cotton 
$0.1122 per lb.; sugar $0.0907 per lb.; wool $0.36 
per lb.; iron $17.67 per ton; copper $0.1656 per lb.; 
rubber $0.49 per lb.; pork $11.35 per bbl.; coffee 
$0.1385 per lb. 

1879 

Wheat $1.24 per bu.; corn $0.47 per bu.; cotton 
$0.1084 per lb.; sugar $0.0881 per lb.; wool $0.37 
per lb.; iron $21.72 per ton; copper $0.1862 per lb.; 
rubber $0.51 per lb.; pork $13.75 per bbl.; coffee 
$0.1387 per lb. 

1880 

Wheat $1.30 per bu.; corn $0.55 per bu.; cotton 
$0.1151 per lb.; sugar $0.0980 per lb.; wool $0.46 
per lb.; iron $28.48 per ton; copper $0.2143 per lb.; 
rubber $0.81 per lb.; pork $19.00 per bbl.; coffee 
$0.15 per lb. 


RANGE OF COMMODITY MARKET 


91 


1881 

Wheat SI.30 per bu.; corn $0.62 per bu.; cotton 
$0.1203 per lb.; sugar $0.0970 per lb.; wool $0.42 
per lb.; iron $25.17 per ton; copper $0.1818 per lb.; 
rubber $0.76 per lb.; pork $20.00 per bbl.; coffee 
$0.1212 per lb. 

1882 

Wheat $1.32 per bu.; corn $0.77 per bu.; cotton 
$0.1156 per lb.; sugar $0.0935 per lb.; wool $0.42 
per lb.; iron $25.77 per ton; copper $0.1912 per 
lb.; rubber $0.87 per lb.; pork $14.75 per bbl.; 
coffee $0.0975 per lb. 

1883 X 

Wheat $1.17 per bu.; corn $0.64 per bu.; cotton 
$0.1188 per lb.; sugar $0.0865 per lb.; wool $0.39 
per lb.; iron $22.42 per ton; copper $0,165 per lb.; 
rubber $1.07 per lb.; pork $20.15 per bbl.; coffee 
$0.0931 per lb. 

1884 

Wheat $1.00 per bu.; corn $0.61§ per bu.; cotton 
$0.1098 per lb.; sugar $0.0675 per lb.; wool $0.35 
per lb.; iron $19.81 per ton; copper $0.13 per lb.; 
rubber $0.96 per lb.; pork $19.50 per bbl.; coffee 
$0.1062 per lb. 

1885 

Wheat $0.94 per bu.; corn $0.51 per bu.; cotton 
$0.1045 per lb.; sugar $0.0653 per lb.; wool $0.32 
per lb.; iron $17.99 per ton; copper $0.1083 per lb.; 
rubber $0.56 per lb.; pork $13.25 per bbl.; coffee 
$0.09 per lb. 


92 


BUSINESS BAROMETERS 


1886 

Wheat $0.88f per bu.; corn $0.52i per bu.; 
cotton SO.0928 per lb.; sugar SO.0623 per lb.; wool 
SO.33 per lb.; iron $18.71 per ton; copper $0.1100 
per lb.; rubber $0.61 per lb.; pork $12.20 per bbl.; 
coffee $0,095 per lb. 

1887 

Wheat $0.88 per bu.; corn $0.48f per bu.; cotton 
$0.1021 per lb.; sugar $0.0602 per lb.; wool $0.34 
per lb.; iron $20.93 per ton; copper $0.1385 per lb.; 
rubber $0.76 per lb.; pork $24.00 per bbl.; coffee 
$0.1684 per lb. 

1888 

Wheat $0.94 per bu.; corn $0.59J per bu.; cotton 
$0.1003 per lb.; sugar $0.0718 per lb.; wool $0.29 
per lb.; iron $18.88 per ton; copper $0.1677 per lb.; 
rubber $0.76 per lb.; pork $16.00 per bbl.; coffee 
$0.1581 per lb. 

1889 

Whe'at $0.91 per bu.; corn $0.43f per bu.; cotton 
$0.1065 per lb.; sugar $0.0789 per lb.; wool $0.35 
per lb.; iron $17.76 per ton; copper $0.1349 per 
lb.; rubber $0.74 per lb.; pork S13.37J per bbl.; 
coffee $0.1765 per lb. 

1890 

Wheat $0.92 per bu.; corn $0.48| per bu.; cotton 
$0.1107 per lb.; sugar $0.0627 per lb.; wool $0.33 
per lb.; iron $18.41 per ton; copper $0,156 per lb.; 
rubber $0.80 per lb.; pork $13.62J per bbl.; coffee 
$0.1793 per lb. 


RANGE OF COMMODITY MARKET 


93 


1891 

Wheat $1.05 per bu.; corn $0.67J per bu.; cotton 
$0,086 per lb.; sugar $0.0465 per lb.; wool $0.31 
per lb.; iron $17.52 per ton; copper $0.1276 per lb.; 
rubber $0.78 per lb.; pork $13.00 per bbl.; coffee 
$0.1671 per lb. 

1892 

Wheat $0,908 per bu.; corn $0.54 per bu.; 
cotton $0.0771 per lb.; sugar $0.0435 per lb.; wool 
$0.28 per lb.; iron $15.75 per ton; copper $0.1156 
per lb.; rubber $0.6763 per lb.; pork $15.05 per 
bbl.; coffee $0.1430 per lb. 

1893 

Wheat $0,739 per bu.; corn $0,499 per bu.; 
cotton $0.0856 per lb.; sugar $0.0484 per lb.; wool 
$0.24 per lb.; iron $14.52 per ton; copper $0.1075 
per lb.; rubber $0.7167 per lb.; pork $21.80 per 
bbl.; coffee $0.1723 per lb. 

1894 

Wheat $0,611 per bu.; corn $0,509 per bu.; 
cotton $0.0694 per lb.; sugar $0.0412 per lb.; wool 
$0.20 per lb.; iron $12.66 per ton; copper $0.0952 
per lb.; rubber $0.6744 per lb.; pork $14.57^ per 
bbl.; coffee $0.1654 per lb. 

1895 

Wheat $0,669 per bu.; corn $0,477 per bu.; 
cotton $0.0744 per lb.; sugar $0.0412 per lb.; wool 
$0.18 per lb.; iron $13.10 per ton; copper $0.1053 
per lb.; rubber $0.7425 per lb.; pork $12.87| per 
bbl.; coffee $0.1592 per lb. 


94 


BUSINESS BAROMETERS 


1896 

Wheat $0,781 per bu.; corn $0,340 per bu.; 
cotton $0.0793 per lb.; sugar $0.0453 per lb.; wool 
$0.17 per lb.; iron $12.95 per ton; copper $0.1098 
per lb.; rubber $0.80 per lb.; pork $10.85 per bbl.; 
coffee $0.1233 per lb. 

1897 

Wheat $0,954 per bu.; corn $0,319 per bu.; 
cotton $0.07 per lb.; sugar $0.0455 per lb.; wool 
$0.21j per lb.; iron $12.10 per ton; copper $0.1136 
per lb.; rubber $0.8454 per lb.; pork $9.00 per 
bbl.; coffee $0.0793 per lb. 

1898 

Wheat $0,952 per bu.; corn $0,376 per bu.; 
cotton $0.0594 per lb.; sugar $0.0497 per lb.; wool 
$0.28 per lb.; iron $11.66 per ton; copper $0.1205 
per lb.; rubber $0.9271 per lb.; pork $12.30 per 
bbl.; coffee $0.0633 per lb. 

1899 

Wheat $0,794 per bu.; corn $0,413 per bu.; 
cotton $0.0688 per lb.; sugar $0.0492 per lb.; wool 
$0.29 per lb.; iron $19.36 per ton; copper $0.1776 
per lb.; rubber $0.9954 per lb.; pork $10.45 per 
bbl.; coffee $0.0604 per lb. 

1900 

Wheat $0,804 per bu.; corn $0,453 per bu.; 
cotton $0.0925 per lb.; sugar $0.0532 per lb.; wool 
$0.28i per lb.; iron $19.98 per ton; copper $0.1665 
per lb.; rubber $0.9817 per lb.; pork $16.00 per 
bbl.; coffee $0.0822 per lb. 


RANGE OF COMMODITY MARKET 


95 


1901 

Wheat $0,803 per bu.; corn $0,567 per bu.; 
cotton $0.0875 per lb.; sugar $0.0505 per lb.; wool 
$0.25 per lb.; iron $15.87 per ton; copper $0.1672 
per lb.; rubber $0.8496 per lb.; pork $16.80 per 
bbl.; coffee $0.0646 per lb. 

1902 

Wheat $0,836 per bu.; corn $0,684 per bu.; 
cotton $0.09 per lb.; sugar $0.0446 per lb.; wool 
$0.26 per lb.; iron $22.19 per ton; copper $0.1216 
per lb.; rubber $0.7273 per lb.; pork $18.70 per 
bbl.; coffee $0.0586 per lb. 

* 1903 

Wheat $0,853 per bu.; corn $0,572 per bu.; 
cotton $0.1118 per lb.; sugar $0.0464 per lb.; wool 
$0.31J per lb.; iron $19.92 per ton; copper $0.1372 
per lb.; rubber $0.9054 per lb.; pork $18.37 per 
bbl.; coffee $0.0559 per lb. 

1904 

Wheat $1.04 per bu.; corn $0.51 per bu.; cotton 
$0,124 per lb.; sugar $0.0478 per lb.; wool $0.56 
per lb.; iron $16.91 per ton; copper $0.1286 per 
lb.; rubber $1.12 per lb.; pork $14.00 per bbl.; 
coffee $0,082 per lb. 

1905 

Wheat $1.01 per bu.; corn $0.50 per bu.; cotton 
$0,094 per lb.; sugar $0.0522 per lb.; wool $0.68 
per lb.; iron $15.79 per ton; copper $0.1568 per 
lb.; rubber $1.27 per lb.; pork $14.15 per bbl.; 
coffee $0,082 per lb. 


96 


BUSINESS BAROMETERS 


1906 

Wheat $0.79 per bu.; corn $0.46 per bu.; cotton 
$0.1105 per lb.; sugar $0.0446 per lb.; wool $0.69 
per lb.; iron $16.37 per ton; copper $0.1923 per 
lb’; rubber $1.26 per lb.; pork $17.33 per bbl.; 
coffee $0,087 per lb. 

1907 

Wheat $0.92 per bu.; corn $0.53 per bu.; cotton 
$0,118 per lb.; sugar $0.0463 per lb.;' wool $0.67 
per lb.; iron $23.12 per ton; copper $0.1993 per 
lb.; rubber $1.11 per lb.; pork $17.27 per bbl.; 
coffee $0,078 per lb. 

1908 

Wheat $0.98 per bu.; corn $0.69 per bu.; cotton 
$0,106 per lb.; sugar $0.0493 per lb.; wool $0.50 
per lb.; iron $15.60 per ton; copper $0.1339 per 
lb.; rubber $0.89 per lb.; pork $15.58 per bbl.; 
coffee $0,082 per lb. 

1909 

Wheat $1.22 per bu.; corn $0.67 per bu.; cotton 
$0.12 per lb.; sugar $0.0477 per lb.; wool $0.62 
per lb.; iron $16.18 per ton; copper $0.1311 per 
lb.; rubber $1.58 per lb.; por, $18.40 per bbl.; 
coffee $0,087 per lb. 

1910 

Wheat $1.11 per bu.; corn $0.58 per bu.; cotton 
$0,152 per lb.; sugar $0.0509 per lb.; wool $0.59 
per lb.; iron $15.24 per ton; copper $0.1288 per 
.lb.; rubber $2.02 per lb.; pork $23.79 per bbl.; 
coffee $0,103 per lb. 


RANGE OF COMMODITY MARKET 


97 


1911 

Wheat $0.99 per bu.; corn $0.59 per bu.; cotton 
$0.13 per lb.; sugar $0.0546 per lb.; wool $0.49 
per lb.; iron $13.68 per ton; copper $0.1255 per 
lb.; rubber $1.21 per lb.; pork $19.15 per bbl.; 
coffee $0,141 per lb. 

1912 

Wheat $1.05 per bu.; corn $0.69 per bu.; cotton 
$0,115 per lb.; sugar $0.0548 per lb.; wool $0.54 
per lb.; iron $14.97 per ton; copper $0.1648 per 
lb.; rubber $1.11 per lb.; pork $19.00 per bbl.; 
coffee $0,158 per lb. 

1913 

Wheat $0.99 per bu.; corn $0.61 per bu.; cotton 
$0,128 per lb.; sugar $0.0472 per lb.; wool $0.51 
per lb.; iron $14.98 per ton; copper $0.1552 per 
lb.; rubber $0.91 per lb.; pork $22.08 per bbl.; 
coffee $0,131 per lb. 

1914 

Wheat $1.02 per bu.; corn $0.69 per bu.; cotton 
$0,119 per lb.; sugar $0.0524 per lb.; wool $0.54 
per lb.; iron $13.30 per ton; copper $0.1310 per 
lb.; rubber $0.72 per lb.; pork $22.71 per bbl.; 
coffee $0,113 per lb. 

1915 

Wheat $1.30 per bu.; corn $0.72 per bu.; cotton 
$0.1025 per lb.; sugar $0.0603 per lb.; wool $0.64 
per lb.; iron $13.65 per ton; copper $0.1754 per 
lb.; rubber $0.62 per lb.; pork $18.21 per bbl.; 
coffee $0,094 per lb. 


98 


BUSINESS BAROMETERS 


1916 

Wheat $1.38 per bu.; corn $0.81 per bu.; cotton 
$0.1435 per lb.; sugar $0.0733 per lb.; wool $0.75 
per lb.; iron $18.79 per ton; copper $0.2830 per 
lb.; rubber $0.73 per lb.; pork $25.96 per bbl.; 
coffee $0,104 per lb. 

1917 

Wheat $2.29 per bu.; corn $1.66 per bu.; cotton 
$0.2345 per lb.; sugar $0.0789 per lb.; wool $1.31 
per lb.; iron $40.26 per ton; copper $0.3008 per 
lb.; rubber $0.71 per lb.; pork $41.31 per bbl.; 
coffee $0.10 per lb. 

1918 

Wheat $2.20 per bu.; corn $1.73 per bu.; cotton 
$0,312 per lb.; sugar $0.0794 per lb.; wool $1.58 
per lb.; iron $36.30 per ton; copper $0.2454 per 
lb.; rubber $0.64 per lb.; pork $48.96 per bbl.; 
coffee $0,122 per lb. 

1919 

Wheat $2.23 per bu.; corn $1.67 per bu.; cotton 
$0,323 per lb.; sugar $0.0903 per lb.; wool $1.41 
per lb.; iron $32.23 per ton; copper $0.1886 per 
lb.; rubber $0.55 per lb.; pork $51.98 per bbl.; 
coffee $0,247 per lb. 

1920 

Wheat $2.32 per bu.; corn $1.48 per bu.; cotton 
$0.3425 per lb.; sugar $0.1652 per lb.; wool $1.30 
per lb.; iron $45.17 per ton; copper $0.1786 per 
lb.; rubber $0.35 per lb.; pork $37.71 per bbl.; 
coffee $0.19 per lb. 



In comparing prices of stocks and commodities with those during the period of 1862 IS/8, it must be re¬ 
membered that quotations during those years were in paper money. The dotted lines show what the record 
would have been had payment been made with gold. In the stock line the average of ten rails were used to 1897, 
since then we have used the average of forty stocks 20 rails and 20 industrials. 








































































































































































































































































































































































































V 




































RANGE OF COMMODITY MARKET 


99 


1921 

Wheat $1.46 per bu.; corn $0.58 per bu.; cotton 
$0,151 per lb.; sugar $0.0635 per lb.; wool $0.64 
per lb.; iron $27.04 per ton; copper $0.1282 per 
lb.; rubber $0.19 per lb.; pork $26.33 per bbl.; 
coffee $0,104 per lb. 


1922 

Wheat $1,235 per bu.; corn $0.63 per bu.; cotton 
$0.2113 per lb.; sugar $0.0609 per lb.; wool $1.05 
per lb.; iron $24.39 per ton; copper $0.1365 per 
lb.; rubber $0,197 per lb.; pork $26.79 per bbl.; 
coffee $0,142 per lb. 

A WORD TO BANKING MEN 

As a check upon the above specific figures, the 
same general results may be shown by the use of 
Bradstreet’s Index of American Commodity Prices 
or the Economist’s Index of English Commodity 
Prices. Both of these indices show tremendous 
fluctuations, and most clearly demonstrate the 
great need for merchants and all dependent upon 
the welfare of merchants, to study fundamental 
statistics. 

Though economists agree that there is a very 
intimate relation between the prices of commodi¬ 
ties and the price of money, many banks expend 
far too little time in studying fundamental statistics 
and in analyzing future money conditions. With 
a general foreknowledge of the tendency of rates, a 
bank may so arrange its maturities as to obtain at 
least one-half of one per cent more on outstanding 


100 


BUSINESS BAROMETERS 


loans than is possible without such knowledge. It 
may be necessary to allow a customer to choose 
either the “ rate ” or the “ maturity,” but banks 
should insist upon their right to fix the other factor 
and, when doing so, should have in mind the ten¬ 
dency of the money market. If the tendency is 
upward and the borrower desires to pay only the 
market rate, the bank should insist on a short loan; 
while if the borrower desires a long-time loan, the 
bank should insist on a rate above current market 
rates. The reverse is true if the tendency of money 
is downward. Some banks even keep a weekly 
record of the exact rate of income their loans 
average. 

To buy bonds when money is cheap, in order to 
obtain a higher income than can be obtained on 
notes, is a very dangerous practice. Banks then 
purchase bonds after the price has advanced and 
are often compelled to sell them at a loss during 
the next money stringency or else refuse accommo¬ 
dation to customers. By studying the teachings of 
fundamental statistics, however, a bank may safely 
purchase high-grade securities with the expecta¬ 
tion of later selling them at a profit. Then such 
banks kno w when this time for selling said securi¬ 
ties is at hand. 

Therefore, the study of fundamental statistics 
enables banks to receive greater income from their 
loans and large profits from the purchase and sale 
of securities. Such a study also helps such banks 
to buy only the highest grade of securities, and, 
moreover, sell them before the money is needed 


RANGE OF COMMODITY MARKET 101 


for reserve purposes and the accommodation of 
local customers. 

In short, banks have two distinct functions: 

(1) Collecting of savings and directing their 
investment. 

(2) Regulating the number and growth of trans¬ 
portation, industrial and commercial enterprises. 

The first function is performed by collecting 
money from a large number of people, known as 
“ depositors,” and loaning the same for definite 
periods by purchasing therewith commercial paper 
and other securities such as most depositors would 
be unable to do independently. 

The second function is performed in two ways: 

(1) By varying the amount of cash and securi¬ 
ties held. For instance, during periods of panic 
or of depression, when most individuals withdraw 
money from useful channels and withhold cash, 
it is a bank’s duty to give out all cash possible by 
purchasing such good commercial paper and high- 
grade securities as are selling below their true 
value. On the other hand, during periods of over¬ 
expansion, it is a conservative bank’s duty to dis¬ 
pose of a large portion of this commercial paper and 
their other securities, storing up large cash reserves 
pending the next period of money stringency and 
panic conditions. 

(2) By creating and monetizing credit through 
the issue of notes and creation of deposits, and 
placing this credit at the disposal of those enter¬ 
prisers whose venture the bank officials believe 
likely to prove sound and profitable. 


102 


BUSINESS BAROMETERS 


In this way such banks not only perform a great 
service both to depositors and borrowers by com¬ 
bining small sums and loaning them in safe and 
profitable channels, but also act as regulators and 
“ storage basins ” for the entire business com¬ 
munity. Conservative banks store cash and cur¬ 
tail credits during periods of over-expansion, when 
the public is willing to loan anybody and buy 
anything, and then give out such cash and expand 
their credits during periods of depression when the 
public refuses to loan solvent borrowers or to 
purchase even the highest-grade securities. More¬ 
over, for performing these two functions such banks 
receive a twofold reward, namely: the market rate 
of interest on the loans and securities held, and also 
every few years a large profit on the sale of securities. 
Moreover, banks which do not fulfill these two 
functions not only fail to serve fully their true pur¬ 
pose in the community, but also make very much 
smaller profits and assume very much greater risks. 

Many banks have heretofore failed to perform 
this second function owing to their inability to ob¬ 
tain independently the necessary statistics for cor¬ 
rectly judging the trend of conditions; but as such 
statistics may now be obtained at small expense 
from a central agency,* this objection is overcome. 
The above also applies as well to borrowers of 
money as to lenders. 

* In order that firms may keep accurately informed as to present and 
future conditions my statisticians accumulate and analyze the necessary 
facts and figures used in determining the same. These figures we supply 
to our subscribers together with certain Weekly Barometer Figures. These 
Barometers are of great value in connection with the purchase of merchan¬ 
dise, the discounting of commercial paper and the investment of money. 

R. W. B. 


RANGE OF COMMODITY MARKET 103 


Moreover, the most successful manufacturers and 
merchants have found that the system of “fixed” 
credit limits for customers is absolutely wrong in 
principle; unjust to customers; unfair to the sales 
force and a source of danger to the firm. Instead, 
a system of “ flexible ” credit limits is used by which 
credits are increased and decreased, in accordance 
with the relative position and size of the latest 
area of the Babsonchart of Business Conditions 
explained in the following chapter. This system 
invariably results in greatly increased sales and yet 
insures that a firm shall be in a strong financial 
position at a time of panic or business crisis. These 
various practical applications of fundamental sta¬ 
tistics cannot, however, be explained in detail in 
this volume. 

An understanding of the Law of Equal and Oppo¬ 
site Reaction is of great value in the study of credits. 


CHAPTER IV 

THE LAW OF EQUAL AND OPPOSITE REACTION 
THEORY OF THE BABSONCHART 

A LL that has been said up to the present re¬ 
garding Fundamental Statistics has been to 
show their great value to bankers, merchants 
and investors. It is now time to show how the 
subjects heretofore mentioned are studied, and what 
justification we have for using the laws upon which 
this work is based. 

All readers at once associate the name of Sir Isaac 
Newton with an apple falling from a tree. This is 
because Sir Isaac was the first who asked why 
apples fall down instead of up, which question led 
to his discovery of the law of gravitation. It is 
evident from a study of Newton’s life, however, 
that he may have considered his greatest work, 
not the discovery of the law of gravitation, but 
rather his research into the Law of Action and 
Reaction.* Newton felt that his studies of the law 
of gravitation were practically complete, and noth¬ 
ing new would be discovered from further investiga¬ 
tion thereof. He was sure, however, that he had 
only made a meagre investigation of the Law of 
Action and Reaction, and that research into that 
law would be rewarded by new and wonderful dis¬ 
coveries. Briefly, the Law of Action and Reaction 
is, “To every action there is always opposed an equal 
reaction 

* For brevity this law is often referred to as the Law of Equal Reaction, 
t See page 15 of Newton’s Mathematical Principles of Natural Philos¬ 
ophy — “ Motts Second Edition.” 


FUNDAMENTAL STATISTICS 


105 


This is one of the most fundamental laws of the 
universe, underlying as it does all the sciences, from 
astronomy to chemistry. At the present time, it is 
usually taught to young people in connection with 
the study of physics under a chapter relating to 
mechanics. Almost everyone has endeavored to 
lift a rock by the use of a crow bar. In doing this, 
he has placed one end of the crow bar under an 
edge of the rock which he is attempting to raise, 
and then a few inches from that end of the crow 
bar which is underneath the rock, he has put a small 
stone which he uses as a fulcrum. A person who 
could not raise this load one-thousandth of an inch 
by straight lifting is able to raise it several inches 
by pressing down on the far end of the crow bar. 
Of course crow bars were used to raise stones when 
the pyramids were being built in Egypt, centuries 
before Sir Isaac Newton was born; but Newton was 
the first man to discover that the distance on the 
crow bar from the fulcrum to the operator’s hand 
multiplied by the force used by the operator equals 
the distance from the fulcrum to the stone multi¬ 
plied by the weight of the stone. 

After the discovery that the Law of Action and 
Reaction applied to the lifting of materials, con¬ 
struction of all kinds was made much simpler; for, 
knowing the weight of the object to be lifted, and 
the measurements of the lifting machine, one can 
figure with pencil and paper just the force required 
to perform the work. Conversely, with a limited 
amount of power, a builder is able to figure just 
how much he can move with the levers, pulleys, etc., 


106 


BUSINESS BAROMETERS 


which he has on hand, and how much larger ma¬ 
chinery he must get in order to do additional work. 

As soon as Sir Isaac Newton published these 
facts, a scientific reason existed for the ordinary 
balance scales and scores of other instruments 
which were then in use and which have since been 
developed. This law is the basis of the steam 
engine, the electric dynamo, water-power machin¬ 
ery, and every other power machine. All calcula¬ 
tion of forces and all formulas relating to them 
derived their conception from this Law * of Action 
and Reaction.* 

If there is one thing which science teaches, it is 
that this Law of Action and Reaction cannot be 
eliminated. We may dread it and attempt to ig¬ 
nore it, but it is always in operation in thousands of 
diversified ways. Whether making a balloon as¬ 
cension or raising our feet in walking, we are work¬ 
ing in accordance with the Law of Action and 
Reaction. 

The study of hygiene is comparatively in the 
same stage in which that of mechanics was a couple 
of centuries ago. As a matter of history, it has 
been only in recent years that fundamental laws 
have been scientifically applied to the study of the 
human body. Instead of grasping the fact that the 

* There is another simple illustration of this law, however, as applied 
to mechanics, to which I wish to refer: namely, the spring. Every one 
who has used a spring gun, knows that in loading the gun he himself has 
pushed back the spring, yet he is likely to think that the gun has more 
energy than he has. This idea, however, is a fallacy. It is impossible for 
a person to store in any spring more energy than he has in his body. The 
spring has simply the energy that one expends in pressing it down; while 
in shooting the bullet, the spring simply expends the energy which was 
put into it. Consequently there is a constant mathematicfft relation 
between the distance that the bullet goes and the force which one uses 
in loading the rifle. 


FUNDAMENTAL STATISTICS 107 

same laws apply to men as to commodities, phy¬ 
sicians used to doctor with different methods and 
various drugs, hoping to hit something, by hook or 
by crook, that would perform a cure. Recently, 
however, there has been a great change, and they 
have learned that men are simply machines, and 
that to do good work they themselves must be good 
mechanics. This means that instead of bleeding a 
patient and filling him up with drugs, as they did 
years ago, physicians now look upon their patients 
as machines and realize that the machine needs 
to be kept clean, well oiled and supplied with fresh 
power. The great heart specialists are now simply 
utilizing Newton’s Law of Action and Reaction as 
applicable to the pump, while other specialists are 
realizing that other organs of the body are nothing 
but individual sewerage systems, power plants, 
and various other mechanical contrivances. 

Moreover, physicians recognize Newton’s Law 
of Action and Reaction in its relation to sleep, 
breathing, eating, exercise, etc. For instance, 
every man has a certain normal line of sleep; that 
is, he requires a certain amount of sleep, which 
varies with different individuals at different ages, 
but which for a given individual at a given age, is a 
constant factor. Furthermore, for all a man varies 
from this normal line of required sleep in one direc¬ 
tion he must compensate by varying a correspond¬ 
ing amount the other side of the line. This can 
be illustrated by considering the X-Y Line of our 
regulaif Babsonchart* as representing the normal 


* See chart inserted opposite the following page. 


108 


BUSINESS BAROMETERS 


amount of work which a given man can average, 
the outline of the black areas representing the 
amount of work that he actually does. Whenever 
the man performs an abnormal amount of labor, 
causing him to lose sleep, a black area is formed 
above the X-Y Line. It then becomes necessary 
for him to rest a corresponding amount, and this 
causes the black area to go below the X-Y Line. 
When any man attempts to ignore the Law of 
Action and Reaction and remain above his normal 
X-Y Line too long, he suddenly becomes ill, and is 
forced to go to bed and make up his required 
amount of rest. This Law of Action and Reaction 
applies in the same way to man’s breathing, food 
and exercise. Our bodies are like the spring rifle, 
we get out of them only what we put into them. 

Not only are certain physicians making great 
progress today through the use of Newton’s Law 
of Action and Reaction, but psychologists as well 
are employing it in their experiments. It is a fact 
well known to students of Newton’s investigations 
that the great scientist found this law to apply not 
only to mechanical and astronomical phenomena, 
but also believed it to apply to affairs more remotely 
removed from such sciences. McLaurin, in his 
famous treatise, entitled Sir Isaac Newton’s Philo¬ 
sophical Discoveries * discussing Newton’s ideas 
concerning even spiritual manifestations, and re¬ 
ferring to the Deity, says: 

“ The establishing of the equality of action and 
reaction, even in those powers which seem to sur- 


* Page 388, edition of 1748. 


January 1, 1924 


Copyrighted. All Rights Strictly Reserved and Protected. 


Cl 



1904 

1905 

1906 

1907 

1908 

1909 


























Babsonchart of American Business Conditions 

(Showing Business in Terms of Dollars) 


_The solid red line is a record of important 

rallies and declines of 40 stocks. The red scale 
figures under 1920 refer to this line. 

-The dotted red line is a record of the aver¬ 
age yield of twenty active bonds. The red figures 
under 1911 iwithjscale inverted! refer to this line. 
■* Stars mark last quotations before going to pri 
- - - The dotted black line is a record of the average 
wholesale price of 20 commodities excluding food¬ 
stuffs. The figures under 1913 refer to this line. 



Explanation of the Babsonchart 

The large shaded areas are formed by combining and 
plotting the Statistical Sheet figures. The subjects used 
are New Building, Crops, Check Transactions, Immigra¬ 
tion, Total Foreign Trade, Money Rates (adjusted scales) 
Failures, Commodity Prices, Railroad Earnings, Stock 
Prices. An index of Canadian business conditions is 
also included. These subjects combined give a Babson¬ 
chart of business in America. When Interstate Com¬ 
merce reports for all United States railroads became 
available, January, 1909, this record was substituted in 
place of the earnings of ten representative roads which 
had been used previous to that time. Revised scales 
were also introduced for monetary figures August, 1912; 
Bank Clearings were used from 1904 to 1918. inclusive; 
Check Transactions for a selected list of cities then were 
substituted. 

The line X-Y represents the country’s net gain or 
growth. Based on the economic theory that “action and 
reaction are equal” when the two factors of time and 
intensity are multiplied to form an area, the sums of the 
areas above and below said line X-Y must, over suffi¬ 
ciently long periods of time, be equal, provided enough 
subjects are included, properly weighed and combined. 

In our office studies each area is divided into halves 
by a narrow white line. This is to emphasize the fact 
that the first halves of Areas A, C and E are really reac¬ 
tions from the extravagance, inefficiency and corruption 
which existed during the latter half of the preceding 
“over-expansion” area. Contrariwise, the first halves of 
Areas B, D and F are really based upon the economy, 
industry and righteousness developed during the hard 
times just preceding. These lines are not drawn on the 
areas of over-expansion until those areas are completed, 
but are drawn on each depression area when said area 
equals one-half of the preceding area of over-expansion. 

An area may temporarily be interrupted and develop in 
two or more parts. Nevertheless, the total of an area of 
depression must finally be equal to the total of the pre¬ 
ceding area of over-expansion before another prolonged 
period of expansion can take place. When the area is 
divided into two or more parts the stock market has two 
or more distinct movements, and clients may be justified 
in taking advantage of them. 

The high points of the stock market have come in the 
early part of the over-expansion areas. The low points 
have come about the beginning of the depression areas, 
although in 1914 the war held prices of both stocks and 
bonds down longer than usual. Low money rates and 
high bond prices have usually come about the end of the 
depression areas and high money rates and low bond 
prices at about the end of the over-expansion areas. 

Further details as to how the Babsonchart is com¬ 
piled and the JC-Y Line located will be sent to any one 
on application. Questions are always welcomed. 






















































































































































































































































































































































































































































































































































































































































































FUNDAMENTAL STATISTICS 


109 


pass mechanism, and to be more immediately de¬ 
rived from Him, seems to be an indication that 
those powers, while they derive their efficacy from 
Him, are, however, in a certain degree circumscribed 
and regulated in their operations by mechanical 
principles.”* 

A student of this treatise will see that Newton 
believed that the voluntary actions of men en masse 
are subject to the Law of Action and Reaction. We 
look upon a mob as the last thing which would 
work in accordance with scientific law, but psy¬ 
chologists tell us that the mob is one of the best 
illustrations of Newton’s Law of Action and Reac¬ 
tion. In our study of history we look upon the 
French Revolution as something abnormal, but it 
could have been foretold by applying this law. 
Moreover, if some way could be found to multiply 

* Notwithstanding the developments of the Action and Reaction Theory 
in mec ! ian i ca t chemical and economic worlds, however wonderful 
and revolutionary they at times appear, nothing interests the writer so 
much as the study of its application to the teachings of Jesus. For cen¬ 
turies, people have mechanically read over the philosophy of Jesus,.that 

whatsoever a man soweth, that shall he also reap,” without recognizing 
the scientific basis existing for these words as applied to spiritual matters. 
We have read about “ overcoming evil with good,” and have considered 
the Golden Rule as a splendid altruistic motto for life, but the scientific 
aspect of these precepts has never properly been emphasized. When, 
however, it is generally realized that the purpose of life is to acquire true 
happiness, and that religion is simply a force to aid us in such acquisition, 
the relation of the Law of. Action and Reaction to these teachings will 
be recognized. Then scientists will be employed in religious work, as they 
long have been in connection with material studies, and as they are now 
becoming interested in biology and the study of the human body. 

The fundamental teachings of the church relating to conduct have been 
respected, but have not been considered practical in their application 
to everyday life. Consequently, the precepts of the Hebrews and the 
Sermon on the Mount, as well as the words of other great religious leaders, 
have not been taken seriously as scientific teaching. A study of Newton’s 
Law of Action and Reaction, however, in connection with the funda¬ 
mentals of religion, shows that a scientific basis exists for faith, obedience, 
sacrifice, and everything else which the great prophets have emphasized 
as essential. This is referred to in Emerson’s essay on “ Compensation ” 
as follows: 

“ Always pay; for, first or last, you must pay your entire debt. Per¬ 
sons and events may stand for a time between you and justice, but it is 
only a postponement. You must pay at last your own debt. Benefit 


110 


BUSINESS BAROMETERS 


the intensity of the strained conditions existing 
prior to this revolution by the length of time that 
these conditions existed, it could doubtless be 
shown that the product thus obtained is approxi¬ 
mately equal to the intensity of the French Revolu¬ 
tion multiplied by its duration. Owing to the 
same law, the Napoleonic Wars were a natural 
reaction from the Revolution. Similarly, every 
intelligent police captain, engaged in handling 
acute situations, such as existed in London during 
the Suffragette activities, realizes the application 
of the Law of Action and Reaction to his work. 
By considering the number of persons engaged in 
a certain uprising and the intensity of that upris¬ 
ing, he is able to figure very closely when the next 
uprising will occur. 

One of the most spectacular examples of this law 
is shown by the history of Japan. Many persons 
wonder how the Japanese nation has been able to 

is the end of nature. But for every benefit which you receive, a tax is 
levied. He is great who confers the most benefits. But the benefit we 
receive must be rendered again, line for line, deed for deed, cent for cent, 
to somebody. 

“ The physiologist has observed that no creatures are favorites, but a 
certain compensation balances every gift and every defect. A surplusage 
given to one part is paid out of a reduction from another part of the same 
creature. If the head and neck are enlarged, the trunk and extremities 
are cut short. Every excess causes a defect; and every defect an excess. 

“ This Law of Compensation will not be balked of its end in the small¬ 
est iota. It is in vain to build or plot or combine against it. Things 
refuse to be mismanaged long. If the government is cruel, the governor’s 
life is not safe. If you tax too high, the revenue will yield nothing. If 
you make the criminal code sanguinary, juries will not convict. 

“ The law of nature is: Do the thing, and you shall have the power: 
but they who do not the thing have not the power. Everywhere and 
always this law is sublime. The absolute balance of Give and Take, the 
doctrine that everything has its price; and if that price is not paid, not 
that thing but something else is obtained, and that it is impossible to get 
anything without its price — this doctrine is not less sublime in the columns 
of a ledger than in the budgets of states, in the laws of light and darkness, 
in all the action and reaction of nature." 

Some day there surely will be a great religious revival which will far 
exceed, both in intensity and permanency, anything which has ever been 
witnessed before. Moreover, this will be due to a general recognition of 


FUNDAMENTAL STATISTICS 111 

expand so rapidly during the last sixty years since 
Commodore Perry opened its ports to commerce. 
The Japanese are held up as world wonders for the 
tremendous progress which they have made in less 
than two generations. The explanation, however, 
is very simple when the Law of Action and Reaction 
is considered. For centuries that nation had been 
bottled up and had been gradually accumulating 
energy. Suddenly, the doors of opportunity were 
thrown open and the same result occurred psycho-* 
logically as occurs mechanically when a charge of 
dynamite explodes. Furthermore, a mathematical 
equality exists between the product obtained by 
the multiplication of the number of years that 
Japan was bottled up and the intensity of that 
period, and the amount of its recent advancement 
multiplied by its duration. The book entitled, 
“ The Great Illusion,” by Norman Angell, illus¬ 
trates on every page the effect of Newton's Law of 


the fact that the fundamental teachings of Jesus are based on purely scien- 
tifac grounds especiaily upon Newton’s Law of Action and Reaction, and 
that the Golden Rule is simply a statement of this law in general terms 
applicable to the man in the street. 

All that we take away from others must, in some way, at some time, 
be given back. All that we do for others will, in some way, at some time 
come back to us. We all have our normal X-Y Lines, and all that we 
raise ourselves through covetousness above this X-Y Line must be made 
up below it. Life is the same as the boy’s spring gun; we can get out of it 
only what we put into it, although we can increase our capacity just as 
the boy could remodel and increase the capacity of his gun. We can raise 
the slope of our X-Y Line of happiness, but to attempt to go above this 
line artificially is of no avail, as it must be made up by an equal reaction 
at some later date. 

Moreover, it is interesting to think what it means to keep on our X-Y 
Line. Scientifically, this simply means dealing justly, and doing unto 
others as we would that they should do unto us. For a long time artists 
have personified justice as a woman holding a pair of scales, without realiz¬ 
ing the scientific fact that the primary Law of Action and Reaction under¬ 
lies both moral justice and the mechanical scales. When we deal justly 
we keep on our line of growth, but whenever we deal unjustly we get off 
this line, and some day we must compensate therefor. Whatever we do that 
raises the X- Y Line of civilization is good, and reacts upon us as good; hut 
whatever we do that lowers the X- Y Line is evil, and such performances react 
upon us as evil. 


112 


BUSINESS BAROMETERS 


Action and Reaction upon nations and communi¬ 
ties, which effect is vividly demonstrated in the 
great European War. 

In this connection the following quotation of 
Prof. Wilhelm Ostwald* will be of interest: 

“ No large enterprise of a technical or industrial nature is 
undertaken nowadays without a very comprehensive lmowl- 
edge of what its future is to be. We are not afraid to invest 
millions of dollars in a work which at the moment, when the 
expenditure is determined upon, has no other existence than 
a prophecy in the form of calculations and drawings made by 
engineers. But we know for a certainty that when the direc¬ 
tions in the calculations and blueprints are carried out, a 
structure will arise possessing all the foretold properties, 
whether it be a bridge, a steamship, or an electrical plant. 

“ While in the technical pursuits prophecies of this sort 
have been developed to an extraordinary degree of accuracy, 
it is somewhat more difficult to gain foreknowledge and power 
of prophecy in the economic world. That is why the few 
who possess this quality to a greater extent than others, 
those who are able to foresee the future with greater certainty 
than others, easily achieve economic superiority. They con¬ 
duct their transactions in accordance with their prophetic 
capacity, and so are able to pocket greater gains than their 
competitors. This ability to see into the future depends 
upon knowledge of the natural laws involved. 

“ Just as mathematics long ago succeeded in separating 
even the most complicated movements into their simple 
periodic component parts, so the statesman must learn to 
decompose the totality of human movements into the simple 
wave elements produced by self-regulation in the various 
fields of human activity. In this way politics can be trans¬ 
formed from a mere knack, as it has been regarded since 
olden times, into a science like technology with the power 
of sure and far-reaching prophecy.” 

That the law of equal reaction applies to eco¬ 
nomic or business conditions is indicated along two 
main lines, physical and psychical. This is because 
the conditions which prevail in the business world 

* Professor Ostwald’s work in the field of chemistry has given him an 
international reputation. He formerly held the chair of chemistry at 
Leipzig University. 


FUNDAMENTAL STATISTICS 


113 


have as their effective causes both physical and 
psychical factors. For example, rainfall is an 
important physical factor that affects business 
trends. This result is reached through the effect 
of rainfall on the crops which are always an influ¬ 
ential factor in determining conditions. The rec¬ 
ords of the weather bureau show that dry and wet 
years do not alternate indiscriminately, but rather 
follow a clearly defined wave movement. This is 
to say that we have a series of years of sub-normal 
precipitation followed by a series of super-normal 
precipitation. An attempt has been made to show 
that sun spots were the cause of these variations in 
rainfall and that these followed an oscillatory mo¬ 
tion, rising, increasing in size and activity, then 
gradually dying down. Whether or not sun spots 
can be used to forecast periods of sub-normal and 
super-normal rainfall, the fact is that weather 
bureau statistics show the existence of such periods. 
This means that whatever effect crop conditions 
have on economic movements is exerted in accord¬ 
ance with the law of equal reaction. 

But more important than the influence of rainfall 
are the psychical factors. Prosperity has a well- 
understood and clearly definable effect on men’s 
minds. So also has a period of depression or ad¬ 
versity. Business conditions depend chiefly on 
what men do. What men do depends on what 
they believe and think; I mean that men act 
according to their real beliefs* and valuations—- 
not necessarily according to what they say they 
believe and think. 


114 


BUSINESS BAROMETERS 


This becomes clear if we follow through the 
usual sequence of business events. Let us assume 
that we are in a period of depression. Mills are 
idle or running half-time, there is little demand 
for goods, and prices are low. Problems of unem¬ 
ployment are worrying our legislators. There is 
little or no profit in doing business and therefore 
little business done. Much capital lies idle, and 
money rates are low. The fact that a considerable 
number of people are out of employment and others 
have had their wages cut, reduces the buying power 
of the people as a whole. But this reduction of 
consumption is not caused by reduced buying 
power alone. The psychical effect of “ hard 
times ” is to induce economy. People have had 
their wages reduced, have been out of work them¬ 
selves or seen others out of work. They become 
fearful of the future and are impressed with the 
advisability of saving something for a rainy day. 
Furthermore it is easier to save if everybody else 
is doing it. In a period of expansion, free expendi¬ 
ture is popular. We have to spend more to 
“ keep up with the Joneses,” but in hard times the 
“ Joneses,” like ourselves, have had their pay re¬ 
duced. So we can reduce our expenditure without 
having their ostentation flaunted before our eyes. 
Economy, being a necessity, is made a virtue, and 
we are not ashamed to practise it. 

This wave of economy and resulting saving is 
not confined to the rank and file. The capitalist 
class is hit by the reduction of dividends and the 
lowering of the rate of interest. Hardest hit of 


FUNDAMENTAL STATISTICS 115 

all are the business enterprisers — those who or¬ 
ganize and direct industry, who take the responsi¬ 
bility of ownership and contract to pay fixed 
interest to capital and fixed wages to labor. They 
rely on the difference between the expenses of pro¬ 
duction and the price of the finished product for 
their share in distribution. When prices first 
commence to fall, this class acts as a buffer and 
stands considerable loss before reducing wages and 
closing plants. 

Economies which result in a lowered demand for 
all goods, affect with special force the demand 
for luxuries. Hence those business enterprises that 
cater to the demand for luxuries suffer most. 
Failures are numerous; those firms that are high 
cost producers, whether because of poor natural 
conditions, over-capitalization, or inefficient man¬ 
agement, are forced into bankruptcy. In fact, the 
only firms that survive such a period of readjust¬ 
ment are the efficient low-cost producers of the 
wares that people want and will pay for. Their 
business is in sound condition, their credits not 
over-extended, their natural advantages at least 
reasonably good, their capitalization low and man¬ 
agement efficient. In short, the whole commercial 
fabric is on a sound and practical basis. 

The cutting off and giving up of luxuries has two 
important effects. By throwing out of employ¬ 
ment persons engaged in the production of luxuries, 
it forces them to seek employment in the production 
of more necessary commodities, thus helping to 
lower the price of the latter to the consumer. The 


116 


BUSINESS BAROMETERS 


effect of the increase in savings which results from 
the popularization of economy is always a large 
increase in bank deposits, especially in the savings 
banks. Thus funds and credit accumulate and are 
available for use when the tide turns. 

The other psychological effect of hard times is 
the increase in temperance and industry. Both of 
these are due in part to the economy referred to 
above. People realize the necessity of clinging to 
a job. When there are many candidates for few 
positions, those who have positions .know that 
should they fail to give satisfaction it would be an 
easy matter to replace them. This is equally true 
of the business enterpriser. He is dependent for 
his business upon the patronage of his customers. 
Competition is keen and buying is slack. His 
success in business is measured by his ability to 
please his customers. This all leads to a powerful 
realization on the part of all classes that the only 
road to success is the road of service. It is clearly 
seen at such times that wealth is the natural reac¬ 
tion from service. Thus temperance, industry, 
regulated plain living, and a willingness to serve go 
to characterize to a large degree all classes of the 
population. It is just this psychical condition 
which lays the strongest foundation for a period 
of prosperity. Such conditions cannot fail to fore¬ 
cast improvement. 

Ordinarily some specific event serves as the im¬ 
mediate stimulus to the inevitable upswing. That 
event may be a war, the opening of new lands, 
bumper crops or an abnormal increase in the cir- 


FUNDAMENTAL STATISTICS 


117 


culating medium. The accumulation of savings is 
certain, sooner or later, to burn holes in the pockets 
of the savers. That is human nature. In any 
case, the primary element in the stimulating factor 
is the new demand for goods. This new demand 
raises the price of those goods upon which the de¬ 
mand falls; and since expenses of production do 
not rise at first or in equal degree, a considerable 
“ spread ” is thereby created between the price of 
the finished product and the expenses of produc¬ 
tion. This means profit for the business enter¬ 
prisers in the lines affected. The wheels, therefore, 
begin to hum, more help is taken on, the mills work 
full time and the demand for necessary raw ma¬ 
terial rises. 

If the new demand be sufficiently powerful so 
that it cannot be satisfied by the operation of the 
existing plants, other enterprisers with adaptable 
facilities are induced to enter the field. This means 
a call for more material, for labor, and as additions 
and new constructions are planned, a demand for 
building material, plants and machinery. As when 
a stone is thrown into the water, the ripples spread 
out in wider and wider circles, so the new demand 
for goods Boon spreads out through the various 
relations of interdependence until it has affected 
the whole economic fabric. 

With the general advance in the cost of living, 
wage-earners are led to demand that the price of 
their services be increased to correspond with the 
rising scale of commodity prices. Demands for 
increased wages are generally granted because the 


118 


BUSINESS BAROMETERS 


price of goods is such that employers would rather 
pay a high rate than lose business by a strike. 

Just as a period of depression carries its antidote 
in the sound psychological conditions which are 
created by depression, so a period of over-expansion 
produces within itself a poison which destroys the 
prosperity. Excessive prosperity makes men ex¬ 
travagant and careless. Rising prices show large 
profits on the books of the business enterprisers. 
Burning with a desire to make still more profits, 
they extend their plants and embark eagerly upon 
new business ventures. Increased income leads to 
an increase in personal expenditure. The employee 
who has steady work and who has seen his wages 
advance is filled with optimism, buys an automo¬ 
bile, builds a shack in the woods or at a popular 
beach. Similarly, his employer buys a couple of 
high-priced motor cars and sends his family to 
Palm Beach for the winter. 

A large market develops for luxuries of all kinds. 
Business enterprisers push on into this field also 
and the demand for new equipment still increases. 
As the natural reaction of adversity is economy, 
thrift, industry and temperance, so the reaction of 
prosperity is to make men extravagant, wasteful, 
self-indulgent and careless. High prices are relied 
upon to make good the loss by waste and ineffi¬ 
cient management. There is little effort to please 
the customers when the books are already filled 
with orders for the year ahead. Labor, while in¬ 
sisting on an increase of remuneration, grows 
increasingly careless as regards the quality of ser- 


FUNDAMENTAL STATISTICS 


119 


vice given in exchange. Every man knows that if 
he is rebuked or his work criticised, he can easily 
find employment elsewhere. 

A decrease in productivity is the inevitable result. 
The willingness to serve is then forgotten and in 
its place comes the notion that the high road to 
wealth and prosperity is the path of speculation. 
The air is full of stories of brokers' clerks and 
messenger boys who secured bargains in stocks or 
land and in consequence are now buying motor 
cars and country estates. Industry, perseverance 
and honest labor are at a discount and each one 
hopes to make his fortune by a lucky strike. There 
is no idea that can possess the human mind that 
has a more destructive effect on those qualities 
that are necessary for efficient production. 

With increased production and rising cost of 
raw materials and labor, the “ spread ” between the 
price received for the finished product and the 
expense of production is gradually reduced. It 
ultimately becomes manifest that there has been 
a disproportionate investment in fixed capital in 
certain lines of industry. The great expansion in 
industry which characterizes a period of so-called 
prosperity always produces a strain on financial re¬ 
sources. It takes more money to finance a business 
enterprise on a high scale of prices. The amount 
that banks will loan on stocks and bonds is based on 
their market values, this amount rising and falling 
as the market value increases or diminishes. Simi¬ 
larly, also, the amount that can be borrowed on 
real estate and equipment depends upon the esti- 


120 


BUSINESS BAROMETERS 


mated value of the security. The value of stocks 
depends not upon their earnings, but upon their 
expected, earnings. It is also possible to borrow 
more on the plant that is making large profits and 
expects to continue to do so, than upon one that is 
earning but little. Thus all along the line credits 
open and expand in proportion to expected earnings. 
When the rising costs of production result in reduc¬ 
ing profits in the lines in which they first advanced, 
the high cost producers in these lines find them¬ 
selves in a weak position. The demand for funds 
makes the interest rate high toward the close of 
a period of over-expansion and this high cost of 
funds is a further check on the progress of industry. 
Creditors at this point begin to take alarm. Stocks 
are widely distributed on narrow margins, and con¬ 
ditions are ripe for a decline. 

When the decline comes, the contraction of 
values necessitates a contraction of the credit 
which had been built up on the basis of the former 
inflation. Loans are called, and securities must 
be sold to meet them. Money rates rise and a 
panic ensues, accompanied by the failure of an 
increasing number of business enterprises. Com¬ 
modity prices fall. Just as when prices are advanc¬ 
ing, everyone is anxious to buy in anticipation of 
further advance, so when prices begin to fall every¬ 
one is anxious to sell in anticipation of further 
decline. Thus demand collapses as the selling 
pressure increases. Since retailers will not order, 
wholesalers cannot* and manufacturers find them¬ 
selves forced to curtail production. The keynote 


FUNDAMENTAL STATISTICS 


121 


of this period is disappointment. Business enter¬ 
prisers are disappointed at the failure of the ex¬ 
pected profits. Investors are disappointed at the 
failures of those enterprises in which their money 
was invested. Wage earners are disappointed, 
first because their increased wages will not buy 
as much as they had expected; later, because the 
high wages and easy positions fail to be maintained. 

When expansion is checked and the volume of 
business falls off, the demand for funds is also re¬ 
duced. The interest rate falls because there is little 
profit in employing funds and we are entering upon 
another period of reaction. The duration of this 
reaction is dependent upon the time necessary to 
liquidate the unhealthful condition which the profits 
and period of over-expansion have created. If the 
reaction is very intense this may be accomplished 
in a comparatively short time; if less intense the 
time will be longer. Not until the unsound busi¬ 
ness conditions and the disastrous psychological 
effects of too much prosperity have been liquidated 
and corrected can the foundations be laid for an¬ 
other boom. 

There have always been periods of depression, 
periods of over-expansion, and intermediate periods, 
as everyone already knows.* There is absolutely 
no dispute regarding this first point. As to the 
duration of these periods there is a distinct differ¬ 
ence of opinion. It is the general impression that 
the great major trends are of about twenty years’ 


* See Monetary Commission volume on “ Crises,” by Prof. O. M. W. 
Sprague of Harvard, a foremost authority on “ Applied Economics.” 


122 


BUSINESS BAROMETERS 


duration, and the minor movements are of about 
five years’ duration, with possibly still other 
swings of about ten years’ duration. Probably 
the most interesting of the older works on this was 
by Samuel Benner, who, from 1875 to 1884, formu¬ 
lated a most elaborate system of charts and who, 
without doubt, clearly foretold the panics of 1884 
and 1893, and the prosperous years intervening. 
Many other men have devised other charts and 
theories, some based on supposed economics and 
others based on superstition, but all 'have been 
found to fail, and have been forgotten.* 

Upon careful examination all these charts and 
theories are found to have two great defects; and 
it is chiefly because the Area Theory herein dis¬ 
cussed eliminates these two defects that the theory 
and the Babsonchart described in the following 
pages deserve attention. 

Reaction Equals Action 

The first defect in the old theory of Benner and 
other writers consisted in the fact that they based 
their calculations simply on either time or intensity , 
instead of on their product. There is no law in 
physics or nature that any action or any reaction 
must come with any definite regularity. There is, 
however, as before indicated, a law under which 
mechanics, medicine, and other sciences move, 
namely that “ action and reaction are equal.” 
This is absolutely true; but when the student at- 

* Recent scientific contributions to the literature on these movements 
have been made by Mitchell, Copeland, Moore, Jones and others. 


FUNDAMENTAL STATISTICS 


123 


tempts to go one step farther, he generally fails. 
For instance, we may say that certain reaction 
amounts to one hundred foot-pounds, but whether 
the body weighs one hundred pounds and is mqved 
one foot or weighs only one pound and is moved 
one hundred feet, we have no way of knowing until 
we learn one factor. 

In other words, to say that a period of over¬ 
expansion or period of depression will last any given 
time, irrespective of the business activity of the 
country during such time, is contrary to all basic 
law. Yet upon such reasoning most of our prede¬ 
cessors have worked, while the others believed that 
a change in conditions comes when figures for pig- 
iron, bank clearings or commodity prices reach a 
certain point. They entirely ignore the product of 
time and intensity. Only by multiplying one by 
the other can the true reaction be ascertained. 
Time, then, may be compared to space, and in¬ 
tensity may be compared to weight, and their 
product to space multiplied by weight, or to “ foot¬ 
pounds.” 

For this reason, when studying a Babsonchart 
like that on p. 108, which is based on a representa¬ 
tive and comprehensive number of business indica¬ 
tors, able bankers and merchants today do not only 
study height or length, but study area. That is, 
such men believe that the shaded portions above 
the average line of growth X-Y, shown in the plot, 
should approximately equal in area the shaded 
portion below said line. Thus, if the country is 
enjoying a condition of only medium activity, 


124 


BUSINESS BAROMETERS 


prosperous conditions may be expected to extend 
over a longer time than if tremendous over-ex¬ 
pansion exists, and vice versa.* 


All Subjects Must Be Considered 

The second great error heretofore made by these 
economists consisted in the fact that each man 
seemed to focus his attention on only one or two 
subjects, instead of making a composite interpre¬ 
tation of all. Some would study bank clearings, 
some foreign trade, others gold movements and so 
on, believing that, as the figures on their particular 
pet subject or subjects changed, it was possible to 
forecast future conditions. Many still believe it 
is possible to utilize certain subjects in this way, 
but all such systems are absolutely wrong. No one 
of these subjects, when studied independently, 
serves to foretell the great changes in conditions 
which have occurred since 1860 . Some of the 
subjects seem to work out better than others, but 
all of them entirely fail to givp proper warning in 
all instances. | 

* See “ Cours d’Economie Politique,” by Vilfredo Pareto, Vol. II. 

t For illustration, “ gold movements ” formerly was used as one of the 
very best barometers of future conditions. During heavy imports of gold 
(such as occurred in 1878-1882) the United States enjoyed unparalleled 
prosperity and after said imports declined and the exports of gold exceeded 
the imports (as in 1882-1883) followed the panic of 1884. This same rule 
worked most admirably in forecasting the prosperous times of 1888-1890, 
the panic of 1893, and the prosperous times of 1898-1902. The rule, how¬ 
ever, did not work in forecasting the panic of 1903 nor the prosperous 
years following, and the heaviest, imports of gold the United States ever 
enjoyed preceded the panic of 1907. Of course the reason for these huge 
imports in 1906-1907 is now well understood; but any one, who in 1906 
simply studied the bare figures, without knowing that such importations 
were artificial, would have been justified in expecting that 1907 and 1908 
would be years of great prosperity. On the other hand, Such an error 
would not have been possible if a study had simultaneously been made 
of the other leading subjects. 


FUNDAMENTAL STATISTICS 


125 


However, a study of all these subjects reveals 
the fact that there has not been a single case when 
a change in conditions has not been fully and 
plainly foretold by a majority of these subjects. 

Four general rules can be worked out for each 
subject — one rule for each of the four periods of 
over-expansion, decline, depression and improve¬ 
ment, respectively. These rules are given in detail 
for each of the subjects under the twelve headings, 
in Chapters VI, VII and VIII. The basis of these 
rules is that very high figures, such as appear during 
a period of over-expansion, foretell a panic or 
period of decline. Very low figures, such as appear 
during a depression, foretell a period of improve¬ 
ment. 

General Considerations 

From the foregoing it is evident that it is better 
to reduce all figures to a single summary plot, in 
order to ascertain the “area” above or below the 
average Line X-Y, although the separate charts on 
the different subjects may be again referred to as a 
check and interpreted in accordance with the laws 
just outlined. If both the Babsonchart and the 
individual interpretations foretell the same change, 
this change may surely be expected to come to pass; 
while if both do not foretell the same change, one 
may assume that at this moment conditions are 
uncertain, although a little later this uncertainty 
may nob exist. 

This practically completes the diagnosis, although 
as a further study, it is interesting to refer back to 


126 


BUSINESS BAROMETERS 


previous history and ascertain what changes, after 
such conditions as exist today, have followed in the 
past. This is accomplished by referring back to 
points in the various past business trends when (1) 
the same area above or below the average line 
existed as exists today; and (2) when a majority 
of the individual subjects foretold the same condi¬ 
tions which they foretell today. 

In connection with this study there is a certain 
sequence of events which is a distinct aid to bankers, 
merchants and investors. This sequence is similar 
to the various stages of disease with which physi¬ 
cians are so familiar. Sometimes one stage of the 
disease “ runs ” longer than usual; but the sequence 
is usually about the same. Likewise, it is not al¬ 
ways possible to judge correctly the exact duration 
of each period of increase or decline in prices; but 
by a study of fundamental statistics it is always 
possible to ascertain approximately in which of the 
following periods we are. If, for instance, a study 
of fundamental conditions shows us to be in a 
period of increasing money rates, we know that we 
probably shall pass through the following changes 
before we shall again enter a period of increasing 
money rates. 


High Money Rates - * , 
Inflated Real Estate Prices 10 
Prosperity 
Activity in All Lines Q 
General Employment ** 
General Buying Resumed O 
Increasing Com. Prices ® 
Religious Interest *T 
Higher Stock Prices ■ 

Greater Efficiency 
Higher Bond Prices ” 


1 Inefficiency 
1 Lower Bond Prices 

O Dishonesty 
“ Lower Stock Prices 
O Crime Wave 
** Lower Commodity Prices 
A Lack of Confidence 
“ General Unemployment 

5 Consolidation of Homes 
Lower Real Estate Prices 
Depression 


FUNDAMENTAL STATISTICS 


127 


The prices of stocks continue to rise after the 
prices of bonds begin to fall. Industry, as a whole, 
generally follows several months behind stock 
prices. The prices of commodities generally stop 
rising at about the time business reaches its height. 
Interest rates are likely to continue to rise until the 
prices of land values have declined sharply. This 
latter event usually completes the decline in prices 
that precedes and accompanies a panic. Condi¬ 
tions in other countries and crop conditions in this 
country also have much to do with the date and 
extent of these periods. 

In short, this study of fundamental statistics 
consists simply in ascertaining present conditions 
and interpreting them with the view of forecasting 
future conditions. It is like the work of a physi¬ 
cian when he examines a man for life insurance. 
The physician first ascertains the man’s present 
conditions and his mode of life. Applying his 
knowledge based on previous history of what usu¬ 
ally follows such conditions, he makes a forecast 
of the man’s probable length of life. That action 
and reaction are equal and that history usually 
repeats itself is the foundation of both the science 
of medicine and the great business of life insurance. 
These fundamental principles apply equally in the 
field of economics and hence the merchant and 
the investor should give the subject of funda¬ 
mental statistics his most careful attention and 
consideration. 


128 


BUSINESS BAROMETERS 


The Mechanical Work 

In the first portion of this book is described the 
meaning of fundamental statistics and their use. 
In this chapter is outlined the theory underlying 
the work and the reason why such statistics may 
be depended upon. Now a few words must be 
given to explaining the mechanical work of com¬ 
piling and reducing these figures to one single 
“ Business Index ” such as is the basis of the 
Babsonchart. 

In approaching the work, although other methods 
may seem sufficient, the need of direct and definite 
results leads the student to seek a systematic, 
comprehensive and uniform practice, so that a 
basis of comparison from period to period may be 
established at the outset. The course usually fol¬ 
lowed by the leading bankers, merchants and in¬ 
vestors when studying fundamental statistics is 
to collect data covering a long period of years, and 
relating to such subjects as the following, which 
are grouped under twelve headings. 

These twelve headings correspond almost iden¬ 
tically with the twelve subjects mentioned in 
Chapter I. 

I. Building and Real Estate. 

Building Operations (with fire losses). 

II. Bank Clearings and Check Transactions. 

Total for the United States. 

For the United States, excluding New York 
City. 


FUNDAMENTAL STATISTICS 


129 


III. Business Failures. 

Tables on number of failures, amount of lia¬ 
bilities, and ratios. 

IV. Labor Conditions. 

Tables of immigration figures and notes on 
the general situation. 

New York Employment Statistics. 

V. Money Conditions. 

Money in Circulation. 

Comptroller’s Reports. (This is the only 
one of the twenty-five subjects for which 
no figures can be obtained monthly.) 

Weekly Statements of the New York Banks. 

Weekly Statements of Reporting Member 
Banks. 

Weekly Statements of the Federal Reserve 
Banks. 

VI. Foreign Trade. 

Imports of Merchandise into the United 
States. 

Exports of Merchandise from the United 
States. 

Balance and Volume of Trade. 

VII. Gold Movements. 

Gold Movements, with tables on the exports, 
the imports and the balance of gold move¬ 
ments. 

Domestic and Foreign Money Rates and 
Foreign Exchange, with tables on the 
rates in London, Paris and Berlin. 


130 


BUSINESS BAROMETERS 


VIII. Commodity Prices. 

Production of Gold. (Tables giving the 
production in the Transvaal Mines which 
best show the trend in the production of 
the entire world.) Prices of Commodities, 
including wheat, corn, cotton, iron, cop¬ 
per, etc. 

IX. Investment Market. 

Stock Exchange Transactions. Tables on 
number of shares traded in, the bond sales, 
and the high and low prices of the ten 
leading railroad stocks given in Chap¬ 
ter II. The latter tables contain the high 
and low prices for each year since 1859, 
and the high and low for the current year. 

New Securities. Tables for the new securi¬ 
ties listed on the New York Stock Ex¬ 
change and figures relative to other issues 
publicly offered or authorized, but as yet 
unlisted. 

X. Crops and Commodity Statistics. 

Crop Conditions and Production of com¬ 
modities, including pig-iron and copper. 

XI. Railroad Earnings * 

Gross and Net Earnings per mile, with 
annual figures for all railroads relative to 
the new mileage constructed, otc. 

Idle Car Figures, for the current year and 
the corresponding months of the preceding 
two or three years. 


FUNDAMENTAL STATISTICS 


131 


XII. Social Conditions. 

Political Factors. 

Religious Statistics. 

The figures on most of these subjects are kept 
upon statistical sheets, and may be divided into 
the above twelve sections. It has taken many 
years to accumulate these figures, as they repre¬ 
sent tedious and careful research. They are the 
foundation of the entire work, and it is impossible 
to make practical use of fundamental statistics ex¬ 
cept in connection with these tables for preceding 
years and months. 

The Babsonchart 

The subjects in the list above outlined are 
arranged so they may be grouped and classified 
under the three following headings: 

In detail this classification is as follows: 

Mercantile Conditions. 

New Building. 

Failures. 

Check Transactions. 

Immigration. 

(And Similar Subjects.) 

Monetary Conditions. 

Commodity Prices. 

Foreign Trade. 

Foreign Money Rates. 

Domestic Money Rates. 

(And Similar Subjects.) 


132 


BUSINESS BAROMETERS 


Investment Conditions. 

Yield of Leading Crops. 

Railroad Earnings. 

Stock Market Conditions. 

Canadian Conditions. 

(And Similar Subjects.) 

Investors and merchants who carefully study the 
figures on these subjects each week obtain a 
barometer figure for present conditions. The 
Babsonchart is really a graphic illustration of the 
statistics compiled and collated from the subjects 
under the twelve headings on the Statistical 
Tables and Charts. 

These statistics are gathered from a variety of 
authoritative sources and tabulated and kept up- 
to-date regularly each week. The figures appear in 
many denominations: for example, Check Trans¬ 
actions are expressed in dollars, Crop Production in 
bushels, Immigration in number of people arriving, 
certain railroad statistics in dollars, etc. To com¬ 
bine all these into one figure, it is necessary to do 
away with the different denominations and express 
all in one abstract figure, or index.* 

In using any index of business statistics it is al- 

* To accomplish this, we introduce a set of intermediate figures called 
Scale Figures. The steps by which these Scale and Index Figures are 
obtained are as follows: Take, for instance, the Actual Figures for Immi¬ 
gration from 1901 to 1911, inclusive. The Actual Figure, 18,300, for 
January of the year 1901 was found to be the lowest for that month of the 
ten-year period and was placed at the lower end of the Scale Table for 
January. 56,200 (in 1905) was found to be the highest Actual Figure in 
January during the same time, and was therefore placed at the high end 
of the Scale Table. The difference between the two Actual Figures was 
37,900, which was divided by 10, and the result, 3,790, added to 18,300 
to make the second figure, 22,090, added again to that for the next, 25,880, 
and so on in arithmetical progression up to 56,200, the highest Actual 
Figure. 


FUNDAMENTAL STATISTICS 


133 


ways necessary to make due allowance for the growth 
in business. If the statistics used represent busi¬ 
ness in terms of dollars, then allowanpe also must 
be made for changes in the level of commodity 
prices. A rise or fall in the average price level will 
affect the record quite as much as a rise or fall in 
actual volume. Before one can determine from the 
barometer subjects whether business is over-ex¬ 
panded or depressed, therefore, he must first allow 
for such growth and price changes. It is apparent, 
for example, that a merchant should not compare 
his sales today with those of ten years ago without 
allowing for changes in both the price level and 
growth of the business. The same amount of trade 
which ten years ago might have represented the 
height of over-expansion, today might represent 
severe depression. During the past ten years the 
average volume of business in the United States has 
grown and prices have been raised. Therefore 
before one can fully interpret the statistics which 
show the position of the country’s business, he must 
first establish a base line against which to compare 
these statistics. 

Some statisticians prefer to eliminate the “ net 
growth ” or secular trend from each of the individual 

In February, the lowest Actual Figure was approximately 23,400 in 
1908; the highest, 68,700, in 1906. The difference, 45,300, divided by 
10, equals 4,530, which added to 23,400 gives 27,930, and, successively, 
the other figures opposite February. Working out each month in the same 
manner, we have as a result a table which is called the Scale Table on 
Immigration. This table gives a scale for each month in which the left 
and right ends are Actual Figures, and the figures between, proportional or 
mathematically graded figures. These are what we mean by Scale Figures. 

We then arrange the Scale Figures in columns, placing zero over the 
column whose average approximates most closely to the average condi¬ 
tions of the years 1903 and 1904,— that is, the depression following the 
1903 panic. This date is taken arbitrarily as the starting point of the 
Barometer. We then place the other Index Figures in series to the left 


134 


BUSINESS BAROMETERS 


subjects before they combine them into a single in¬ 
dex figure. This is done by various mathematical 
processes. Of course, when the growth element is 
eliminated, it then is possible to use a horizontal 
base line instead of a sloping X-Y Line when com¬ 
paring the index figures. To the casual observer it 
appears that the statisticians who use this method 
avoid the difficulties of locating an “ X-Y ” Line. 
This is not the case; they -have to calculate 
how much of the increase in the business records 
they believe represents normal growth before they 

and right of zero. If the volume of business increases, so as to go beyond 
the scales, higher scale figures are added, using the same arithmetical 
progression as at first, so that the actual condition of the years 1901-1911 
serves as a constant by which to compare succeeding years. Scales similar 
to this one on Immigration have been prepared for all the subjects, and 
with these in hand, we are prepared to combine our figures and prepare a 
Babsonchart. By having a separate scale for each month, the seasonal 
fluctuations are eliminated. 

Moreover, persons using different scales would obtain similar plots. 
Although their definite figures for each week or month would differ, yet 
the relation of one week to another should be identical. 

A simple illustration of the way the scales art used is the following: 
Suppose domestic money rates are 4%. By referring to the money rates 
scale, we find that a 4% rate equals +20 on the index. +20, therefore, is 
the index figure, and since it is abstract, it can be combined with the index 
figures for all of the subjects. A similar process is performed with each of 
the other subjects. 

In order to get a single index figure of general business conditions, we 
have simply to average the individual index figures together. It is this 
summary index figure which all business men and investors watch most 
closely and it is this figure which is charted to form the Babsonchart. 

In reality it makes little difference what the definite scale figure is, pro¬ 
vided the base is submitted therewith to use for comparative purposes; for 
it is a fact that if a number of different statisticians with different scales 
which started at different times, should plot their summary figures, all 
the plots would look alike and the relation of the different areas above and 
below the average lines would be the same. In other words, different men 
with different scales would obtain different summary barometer figures for 
a definite dale; but the relation between their figures would be the same 
always, and this is the only vital and important feature involved. 

For this reason bankers, merchants and investors are justified in using 
the barometer figures worked out by a central agency and thus avoiding the 
difficulty and expense involved in working out such figures for themselves. 
Moreover, as such a central agency continually plots these summary 
barometer figures, today it is only necessary for the up-to-date business 
man to refer to the plot furnished by the central agency and keep in abso¬ 
lute touch with the area being consumed on the present movement. He 
then can independently forecast for himself: (1) In w+at period we are 
today; (2) Whether the next period will be a period of over expansion, a 
period of depression, or an intermediate period. Is not this information 
about all the able banker, merchant or investor needs? 


FUNDAMENTAL STATISTICS 


135 


can subtract that amount from the original statis¬ 
tics. 

We have felt that it is very much better not to 
attempt to subtract the growth factor from the 
figures, but to represent it on the chart by the 
X-Y Line. There are several important advan¬ 
tages: (1) It permits every one to see what allow¬ 
ance is being made for normal growth. This in 
itself is valuable information. (2) It makes it pos¬ 
sible for one to compare the figures of his own busi¬ 
ness with the Babsonchart without first correcting 
them to elinpnate the growth factor. (3) In times 
of sudden change, such as occurred during the war, 
mathematical methods of subtracting growth from 
the original data all fail. Those who followed the 
aforesaid method were compelled to break their 
charts in 1914 and begin on a new calculation after 
the war period. 

As economists differ in their definitions of wealth, 
so statisticians differ in their selection of the basis 
upon which to draw this line. Probably the best 
subjects for an X-Y Line are the Census Reports 
on the growth of manufactures, farm values, 
mineral products, lumber cut, population, etc. 
Unfortunately, those figures are not available at 
frequent intervals, some of them being reported 
but once in five or ten years. It is necessary to 
find some subject which can be obtained at least 
once a year. 

After considerable study of the different subjects, 
it seems clear that the subject most successful as 
an indicator , from this practical point of view, is 


136 


BUSINESS BAROMETERS 


the volume of bank clearings,* now check trans¬ 
actions for the country, excluding New York City. 
(New York City is excluded because its clearings 
represent so large a proportion of the entire figure 
that they hide the true industrial conditions shown 
by the remaining cities.) 

It is; of course, always dangerous to use one sub¬ 
ject alone, especially a subject reflecting surface 
movements. For this reason we were unwilling to 


* In attacking this problem we experimented by taking first one series 
of statistical data and then another, and comparing them with the trend 
of growth in past years as shown by the Census figures. Of all the barom¬ 
eter subjects available we found that the trend of Bank, Clearings, exclud¬ 
ing New York City, coincided most closely with the trend of the Census 
Reports. In other words, Bank Clearings in years past have formed the 
most reliable index of the net growth of the country’s business in terms of 
dollars. They have the advantage of representing both the effect of price 
changes and of changes in the actual volume of business. 

The process of locating the X-Y Line according to the trend of Bank 
Clearings was purely mechanical. Surveying the curve made by the 
Business Index figure it was obvious that the period from 1905 to 1908 
comprised a complete action and reaction,— that is, a period of over¬ 
expansion followed by a period of depression. We then took total Bank 
Clearings (excluding New York City) for the year 1905 as a base and 
figured the percentage of increase shown by each of the years 1906, 1907, 
and 1908 over this base. Plotting these percentages we obtained a curve 
showing the general trend of net growth. This curve was then placed 
over the curve of the Business Index figures for the period 1905 to 1908 
so that it would divide the Index curve into equal areas. This not only 
gave us the X-Y Line for the period 1905 to 1908, but it also furnished the 
scale by which to carry on later figures. 

When placed so that Area B on the Babsonchart was equal to Area C, 
the Line at the end of 1905 ran through plus 24 of the scale by which the 
Business Index figures were plotted. At the end of 1908 it ran through 
plus 27. The Line between these two dates rose three points. In the 
same period Clearings increased 6%. Therefore, the X-Y Line rose one- 
half point on this scale for every 1% in Clearings. In carrying on the 
X-Y Line for succeeding years the Clearings figures w r ere plotted at this 
ratio. 

At the beginning of a new year there is, of course, no basis upon which 
the X-Y Line for that year can be calculated. It therefore is carried as a 
horizontal line from the point established at the end of the preceding year. 
As soon as the Clearings for the year are reported the position of the X-Y 
Line is established. 

It was advisable in 1921 to substitute Check Transactions (as reported 
by the Federal Reserve Banks) for Bank Clearings. The reason for this 
was that many cities for which Bank Clearings formerly'w r ere reported, 
began reporting Check Transactions instead. Eventually the records of 
Bank Clearings will probably be discontinued entirely and the Federal 
Reserve Banks’ reports of Check Transactions will be the only record 
available. In splicing the two records we took care to determine the ratio 
between the two as accurately as possible so that there should be no diffi¬ 
culty as a result of the change. 


FUNDAMENTAL STATISTICS 


137 


rely entirely upon Bank Clearings reports as an 
indicator, and the same now applies to Check 
Transactions. Conclusions based upon this sub¬ 
ject are checked up at the end of each year by all 
the important barometers which are reported 
annually, and again at the close of each area of 
depression on the Babsonchart. So far, however, 
the Line located in accordance with the trend of 
Clearings (now Check Transactions) has coincided 
very closely with the other indicators of business 
growth. Moreover, at the close of Area E it was 
found that the X-Y Line, as located in accordance 
with Clearings, divided the areas almost exactly 
equally, so that no readjustment of the Line was 
necessary. This was an interesting testimonial for 
the use of Bank Clearings. 

It should be clearly understood, however, that 
the merit of the X-Y Line depends not upon Bank 
Clearings or Check Transactions, but rather upon 
the fact that it does divide the areas of business 
expansion and depression equally. Hence, if at 
the close of an area of depression we should find 
that the area below the Line did hot balance with 
the preceding area above it, we would not hesitate 
to raise or lower the X-Y Line to make them bal¬ 
ance. In other words, the Babsonchart does not 
prove that the Law of Action and Reaction applies 
to business, but rather assumes it. It is probably 
too much to expect that Check Transactions repre¬ 
sent the net growth of business with 100% accuracy. 
On the other hand, from past experience we are 
justified in expecting that the current X-Y Line 


138 


BUSINESS BAROMETERS 


as temporarily based on Check Transactions will 
fall very nearly in its right position. 

The X-Y Line not only serves to define the areas 
of over-expansion and depression in general busi¬ 
ness, but it also furnishes the standard toward 
which every business man should work. It repre¬ 
sents the approximate rate at which business can 
be carried on indefinitely without the necessity of 
periodic readjustment and wasteful depression. 
It shows the net gain (in terms of dollars) made by 
the nation as a result of the right use of land, 
labor,- and capital in all forms. By “ right ” use 
of these factors is meant that use which brings 
about efficient production of wealth, together with 
a consumption of this wealth which is also pro¬ 
ductive and not wasteful. 

The solid red line on the Babsonchart represents 
the average price of 40 stocks during the past 
years and the dotted red line, the average yield of 
20 bonds. Although during these years the stock 
line has discounted the black area, yet this cannot 
be depended upon, as previous to 1903 there were 
instances when the black area rose and fell first. 
Therefore, the only safe method is to study both 
of these together, giving the most weight to the 
Babsonchart. 

Although the main use of the barometer figures 
is to plot the “ area ” mentioned earlier in this 
chapter, the figures themselves are also useful. 
Practically speaking, they are mathematically cor¬ 
rect. If, during a period of depression, the final 
barometer figures for a long period of weeks ^how a 


FUNDAMENTAL STATISTICS 


139 


continuous but slow increase, the country is usually 
facing improved conditions, however poor business 
may appear to the average merchant. On the 
other hand, during a period of over-expansion, if 
the barometer figure for surface conditions con¬ 
tinues to increase abnormally, there is likely to be 
a change for the worse at any time. 

The fundamental principle to be remem¬ 
bered, however, concerning the Area Theory 
is as follows: If X-Y truly represents the nor¬ 
mal development of the nation’s business, 
and if the black areas truly represent the 
actual course, then the sums of the areas 
above and below the line X-Y must, over 
sufficiently long periods of time, be equal. 

Monthly Interpretations 

But in addition to collecting figures to deduce 
barometer figures therefrom, some merchants and 
bankers have the monthly figures on each of the 
twenty-five or more subjects mentioned above, 
interpreted* each month for what they signify. 

Such interpretations are made in accordance with 

* The interpreting of these figures is greatly simplified by the following 
arrangement: — Monthly figures on the various subjects, and their sub¬ 
divisions, for the last ten years, are tabulated on statistical sheets before 
mentioned. These figures are brought up to date once a month. Annual 
figures' on most of these subjects since 1860 can also be obtained, being 
brought up to date every year. , „ . , , x 

In addition, however, to having the figures in such sheet torm (thus 
always enabling the banker, merchant or investor to have before him a 
bird’s-eye view of the situation), it is also desirable to have the definite 
figures for each month with a comparison with figures for the same month 
of the previous year on a separate sheet. This shows one at a glance 
whether the new figures for the current month on each subject show an 
increase or a decrease. As soon as this is ascertained one may refer to the 
rules and know what this increase or decrease signifies. As each subject 
is interpreted in this way, the different interpretations should be recorded 
and a final summary made. This summary should show how many of the 


140 


BUSINESS BAROMETERS 


the rules given in Chapters VI, VII and VIII, and 
show how many subjects signify a “ Continued Im¬ 
provement, n how many signify “ No Improve¬ 
ment ” and how many signify “ No Change.” 
Figures on the majority of the necessary subjects 
can be obtained not oftener than monthly, and 
therefore final totals need be studied in detail but 
once each month. If there has been a normal 
growth or change,— sometimes a favorable showing 
requires an increase or sometimes a decrease,— the 
figures on a given subject are considered as signi¬ 
fying satisfactory conditions; but if a growth or a 
change is not normal, the figures are considered as 
showing unsatisfactory conditions. In other words, 
satisfactory conditions require a normal change and 
figures of much less than normal or much more than 
normal are considered unsatisfactory. 

The whole industrial organization of the country 
is governed by the law that reaction equals action. 
In a rapidly growing country like America, the 
figures to be normal must increase in proportion to 
the increase in the wealth, population and activity of 
the country. Great increases or great decreases are 
distinctly abnormal and are always significant of a 

subjects signify continued improvement; how many signify no improve¬ 
ment; how many signify caution, and how many signify no change. 

As this work is purely mechanical, there is no reason why bankers, mer- 
chants and investors cannot also depend upon a central agency for prepar- 
ing these comparisons in the form of ajnonthly report. When this is done 
the work is tremendously simplified for any student of fundamental sta- 
tistics. Therefore not only may arrangements be made for collecting the 
original figures, as they appear from day to day, and as they have appeared 
in the past, and for having them reduced to barometer figures and plotted — 
the first feature of the work; but arrangements can also be made to have 
them tabulated m sheet form and interpreted once a month. This, there¬ 
fore. eliminates all mechanical work on the part of any bank, firm or in¬ 
dividual, and it is only necessary for one to note the plot once a week, and 
take a general view of the tables whenever convenient. Upon so doing 
one automatically makes a forecast of future conditions. 


COMPARISON OF THE MAIN FEATURES OF SEVEN PANICS WITH SPECIAL REFERENCE TO THEIR EFFECT IN THE UNITED STATES 


Antecedent 

Conditions 


Initial 
Steps in 
Crisis 


Extent of 
Crisis 


Immediate 

Effect 


Duration 
of Crisis 


Legislation 


1857 


1873 


1884 


1893 


1907 


1914 


1920 


Mexican War at home—Crimean War abroa.l 
Gold discoveries of 1848-49—production 
«“•«» “B to 1856 aiding in'preveMing"*,' 
which might have been caused by suspension of 
Lnited States Bank and other banks. It also 
contributed to recovery from depression incident 
to crisis of 1857. United States—a rapidly d 
velopmg nation, at the same time financially 
weak as compared with European countries 
Large absorption of capital through activity in 
canai and railroad construction, especially in 
1856, and through great national development 
along many lines. Enormous expansion in bus - 
ness, great prosperity and much extravagance 
Proportion of specie to loans and to circulation 
always small. Large bank deposits prior t 
crisis but steadily increasing and finally excessiv e 
loans. Defective currency and unstable bankim 
No machinery by which banks could restrain or 
check capital expenditures for unwarranted ex 
pansion of business. 

Banks in 1846, 707; in 1857, 1,416 

Bank capital in 1846 $196,000,000; in 1857 $370 000 Of 
Metallic reserves in 

Tci* 847 - - 35,000,000 " 59,000,00 

Note circulation in 

_ 1843 . 58,000,000 “ 214 000 00> ' 

Deposits in 1846 - 91,000,000 “ 284'44501 

Loans in 1843 . 254,000,000 “ 684 000’00 

Circulation per capita 

in 1840... ........ 10.91 “ 15.81 

excess merchandise 

imports for 8 years 

prior to 1857. 335,210,82 1 

excess gold exports during same period. 275,519 56 * 

American Civil War and Franco-German War. 
The Chicago fire.—Gold output of United States 
for prior 16 years $735,750,000. Railway, indus¬ 
trial and other construction work all over the 
world on scale previously unknown. Great prog¬ 
ress in development of our natural resources. 
Enormous increase in manufacturing, and agri¬ 
cultural activity and output, involving colossal 
absorption of capital. Limited business organi¬ 
zation, much destructive competition and no 
little looseness in business morality. National 
credit high, but monetary system imperfect and 
currency somewhat inflated. National banks 
created chiefly to insure a market for government 
bonds, through bond-secured national bank 
notes. Government became more closely identi¬ 
fied with the nation’s banking affairs, but no 
means provided enabling banks to check over¬ 
straining of credit. Steady expansions of loans, 
great prosperity, a scale of living and personal 
expenditures never before seen in United States. 

National Banks *Other Banks 

Number in 1873. 1,968 - 

Bank capital in 1873.$490,109,801 $42,780,809 

Reserves in 1873. 252,178,503 - 

Note circulation. 338,964,475 174,714 

Deposits in 1873. 641,121,775 913,117,643 

Loans in 1873. 925,557,682 514,081,496 

Per capita circulation in 1873 . 18.04 

Excess merchandise imports for 

16 prior vears. 1,204,676,204 

Excess gold exports for 16 prior years. 687,941,419 

♦Incomplete data taken from Report of Comptroller for 
1873. 

Stock Exchange securities declined, and mar¬ 
ket became demoralized. High interest ruled 
transaction of business became difficult, con¬ 
traction set in, and being accompanied by bank 
failures, loss of confidence ensued and sudden 
collapse followed. Failure of Ohio Life Insur 
ance & Trust Co. on August 24, 1857, market: 
beginning of crisis, although panic was post¬ 
poned till October 13. 

High interest rates for preceding two years, 
extremely low reserves, irregularity in security 
prices and panicky conditions on the Stock 
' Exchange. Enormous amount of railway secu¬ 
rities placed on the market, embarrassing insti- 
1 tutions endeavoring to float them. Crisis on 
L T nited States ushered in by failure on Septem- 
ber 18 of Jay Cooke & Company, followed by 
j panic conditions. 

Initiated by excessive development in the 
United States and extended all over the world 

Largely due to over development in America 
it began in Germany and became world wide. 

Runs on banks—hoarding by banks and indi¬ 
viduals. Banks refuse to redeem notes in specie. 
Bank notes were discounted. Interest rates 
rose to 25 per cent and later to 100 per cent; 
securities were unsalable. Failures of banks, 
commercial and industrial institutions numer¬ 
ous, and widespread and general business 
stagnation ensued. Railroads temporarily sus¬ 
pended payments. Commodity prices fell 

from 10 to 35 per cent—even wheat was 
unsalable through unusual harvests abroad. 
Gold imports for the year ended June 30, 18. 7, 
$6,654,636. Exports "of gold and silver, $69- 
136,922. 

Bank deposits withdrawn; loans unobtainable 
on collateral; much money disappeared from cir¬ 
culation; legal tender notes at 3% premium; 
gold at 106; bank failures; 9 failures in every 
1,000 commercial houses. $15,000,000 of gold 
imported. Stock Exchange closed for 10 days, 
suspension of payments lasted 40 days. No in¬ 
dustry remained unaffected. Universal discon¬ 
tinuance of work, commodities dropped 20%, 
and many were unsalable. Treasury bought 
$13,500,000 government bonds, New York Clear¬ 
ing House issued $26,565,000 certificates and 
made common fund of associated banks’ legal 
tender notes. 

Crisis period between three and four months. 
Recovery on Stock Exchange began when banks 
resumed” specie payments in December, 185* 
Real recovery from depression, which begaB 
early in 1859—more than two years after t\M 
panic—was based on the bright agricultural outl 
look, which, however, was somewhat affecte* 
by unusually late frosts. 

Crisis period about three months. Recovery 
on Stock Exchange began November 13, 1873. 
Depression period longer than in ’57 and ’93. 
Slight business revival in 1877, marked improve¬ 
ment in some trades in 1878, real recovery early 
in 1879—year of resumption of specie payments. 
Improvement continued, with interruptions in 
1884 and 1890, until 1893. 

Congress took no steps to improve currency 
and banking conditions. 

Legislation provided a safe but inelastic bond- 
secured currency. 


Creat. and rapid expansion of the. West, and 
enormous railroad construction. Earnings of 
railoads large, on account of hauling their own 
supplies for construction, the earnings declining 
as the roads approached completion. Parallel 
lines constructed in the endeavor to compete in 
traffic. Large iron production. Tremendous 
inflation of securities by new issues and by pay¬ 
ment of large stock dividends. Silver question 
more or less in evidence as a disturbing factor. 
Bank clearings increasing enormously. The 
Trunk Line Hate War raged among the rail¬ 
roads; disastrous to earnings. Considerable 
tariff agitation. 

National Banks Other Banks 


Number in 1884.. 2,625 1,486 

Bank capital ... $522,515,996 $133,884,004 

Reserves. 196,400,000 lawful money- 

reserves: data 
incomplete 

Note circulation.. . 330,689,893 - 

Deposits 979,020,350 1,587,379,650 

Loans.]. 1,269,862,936 990,837,064 


Per capita circulation 22.65 

Excess merchandise exports for 11 prior years, 1,475,363,359 
Excess gold imports for 11 prior years. 92,456,148 


The inflated condition of things in 1881 needed 
only some severe shock to throw the country into 
a decline, which event occurred in the assassina¬ 
tion of President Garfield. The country rallied, 
however, from this disaster, Jay Gould making 
his famous exhibit of securities in 1882 in the vain 
effort to stay the panic. An over-weighted stock 
market was still further shaken by partial crop 
failures and a new tariff. In the beginning of 
1884, Henry Villard failed. This was soon fol¬ 
lowed by failure of Jas. R. Keene, the Marine 
Bank, the Metropolitan Bank, and the house of 
Grant and Ward. This last failure was dis¬ 
heartening, as General Grant was the idol of the 
nation. Startling frauds were brought to the 
surface. 


A severe panic convulsed France in 1882, but 
matters did not come to a head in the United 
States until 1884. All Europe felt the effects of 
depression. 


Railroad Construction declined, Bank Clear¬ 
ings decreased tremendously, and the customary 
failures were very large. Commodity prices suf¬ 
fered a severe decline, and the New York Clear¬ 
ing House, as in the panic of 1873, came to the 
rescue with an issue of Clearing Houses certi¬ 
ficates. Stock fell from high values to the lowest 
point of any date since 1879. Manufacturing 
and commercial industries withstood the shock 
fairly well, being on a firm basis. 


Crisis was of short duration. The stock market 
was at its lowest point in the fall of 1884, and in¬ 
creased the next year considerably, the crops 
in that year helping out the situation. Final 
recovery was made during 1886, and plans for 
large undertakings were set forth. By 1887 
prosperity was again in full swing. 


Various bills for reduction of the tariff defeated 
in Congress, bringing increased confidence to the 
trading public. The passing of the Interstate 
Commerce Act in 1887 inaugurated the policy 
of railroad control by the government. 


A period free from destructive wars. Great 
railway and industrial development by England 
in her colonies and in such regions as South- 
Africa and South America. Many highly specu¬ 
lative enterprises launched. Heavy and increas¬ 
ing demands on capital precipitated a crisis 
abroad, signalized by the Baring failure in 1890. 
In the United States, while the decade prior to 
1893 saw many railroad receiverships, there was 
much competitive railroad building and absorp¬ 
tion and extension of smaller lines by larger 
systems. Period one of varying prosperity in 
the United States, due largely to local causes. 
Specie payments resumed in 1879. Silver ques¬ 
tion settled in Congress, but continued disturb¬ 
ing element for three years. An era of unrest. 
Our country was going ahead in leaps and 
bounds, in agriculture and manufacturing and 
in production of iron and steel. A time of 
readjustment between labor and capital and of 
progress in business concentration through or¬ 
ganization. Usual waves of extravagance, but 
held somewhat in check by fluctuations in 
prosperity. Cumulative abuse of credit which 
banks were without power to control. 


National Banks Other Banks 

Number in 1893 3,796 5,685 

Bank capital.. . $683,598,120 $406,007,240 


( 32.66% Oct. ( plete 

Note circulation 182,959,725 9,534 

Deposits. 1,451,124,380 3,070,462,680 

Loans. 1,843,634,167 82,297,377,436 

Per capita circulation 24.03 

Excess merchandise exports for 20 prior years, 1,871,363,691 
Excess gold exports for 20 prior years. 7,290,381 


Issue of silver certificates beginning June, 
1890, warded off crisis initiated in England, but 
alarmed European investors who returned Amer¬ 
ican securities. Great excess of imports; diffi¬ 
cult to maintain national redemption fund; gold 
driven out through “endless chain”; enormous 
expansion of bank loans in West and South. 
Stock Exchange securities declined 30 to 50 
per cent; sudden contraction of loans early in 
summer of 1893; issue of Clearing House certi¬ 
ficates; Reading Railway and National Cordage 
Company failed. Beginning of crisis July 25, 
when Erie failed and Milwaukee Bank suspended. 

Originating in England in 1890, it extended 
to other European nations, but did not reach the 
United States till 1893. 


The usual phenomena of runs on banks, hoard¬ 
ing, difficulty in seeming loans. Clearing House 
certificates issued to the amount of $41,490,000. 
Many banks refused to honor checks for cash 
payments, others only paid cash for payroll pur¬ 
poses. Bank checks issued for currency at 4 per 
cent premium. This stimulated hoarding to 
secure premium, but also aided gold importation. 
During August to November $51,936,111 of gold 
arrived, $35,007,645 being received in August 
alone. 160 national banks suspended and 13 
business houses in every thousand failed. Con¬ 
gress repealed the vicious Silver Purchase Law. 

Stock Exchange was at its lowest July 26. 
As soon as gold imports were assured there was 
general recovery in prices. The acute stage of 
the crisis, about forty days, ended in early Sep¬ 
tember, 1893. By July 1, 1897, general busi¬ 
ness revival had set in strongly. 

No broad measures for improving the currency 
system. Repeal of Silver Purchase Law on 
October 30, 1893. 


Widespread business stagnation followed 
1893. Great distress of workmen. Second 
Boer war, Chinese-Japanese war, Spanish-Amer- 
ican war and Russian-Japanese war. Destruc¬ 
tion of San Francisco by earthquake and fire in 
1906. Fear of free coinage of silver settled at 
polls. Congress protected Treasury’s gold from 
depletion by “ endless chain.” Railroads emerged 
from receiverships; great railroad systems 
further perfected by purchases and mergers; 
greatest development period country has ever 
known, especially in business organization to 
secure stability, economy in administration, 
efficiency in production and protection from de¬ 
structive competition. Relations between capi¬ 
tal and labor adjusted with less friction; distinct 
advance in standards of business morality 
through agitation and public demand for full 
publicity in corporate management. Whole 
period marked by astounding growth in the 
nation’s prosperity, wealth and importance as a 
world power, but with corresponding develop¬ 
ment of extravagance, while the demand on 
capital reached fabulous figures. 

National Banks *Other Banks 

Number in 1907.... 6,625 17,508 

Bank capital.$901,681,681 $807,178,262 

Reserves. 1,033,578,142 (20.8%) Data incom¬ 

plete 

Note circulation. . . . 687,340,835 29,519 

D?pceits (individual) 4,176,873,717 8,776,900,000 

Loans. 4,585,337,095 6,082,662,903 

Per capita circulation 32.22 

Excess merchandise exports for 14 prior years, 5,763,661,646 

Excess gold imports for 14 prior years. 198,299,557 

♦Investigations by Director of the Mint reduce the esti¬ 
mate of gold coin July 1, 1907, $135,000,000, as com¬ 
pared with previous year. 

Credit, conditions among several nations fa¬ 
vorable to crisis. A business momentum which 
the credit resources of the country were unable 
to meet. Enormous money requirements of 
railroads and industrial enterprises. Steady 
advance in interest rate, and decline in security 
prices. Increase cost of commodities and labor 
finally offset business profits. Liquidation in 
commodities; loss of confidence from several 
causes. Crisis inaugurated by runs on banking 
institutions, suspension of Knickerbocker Trust 
Co. and panic conditions lasting several days. 

Developed through similar causes coincidently 
all over the world. Had its first expression in 
the United States. 


Almost identical with effects of 1893; runs on 
banks; many loans called and no money offered 
on New York Stock Exchange for 24 hours. 
Currency premium 3j%. $74,461,027 Clear¬ 
ing House certificates were issued. Freedom 
from European indebtedness, premium on money 
and need of American cereals and cotton abroad 
made gold imports impossible; over $100,000,000 
imported to January 1, 1908. 

The Secretary of the Treasury co-operated 
with the informal Bankers’ Committee, headed 
by Mr. Morgan, to relieve situation; offerings 
of money on the Exchange immediately resumed; 
Treasury increased deposits in bank at once 
$41,360,000. $25,000,000 Panama bonds and 
$15,000,000 one-year 3% certificates sold by the 
Government and used for circulation. National 
bank circulation greatly increased prior to and 
during crisis, the total outstanding on January 1 
being nearly $700,000,000. 

Formation of the National Monetary Com¬ 
mission whose investigations ultimately resulted 
in the Federal Reserve Act. 


The greatest event in this year was the Euro¬ 
pean War. The decline of 1913 quickly de¬ 
veloped into depression. Several enormous 
failures occurred in June and July, including the 
Claflin catastrophe. This liquidation, however, 
seemed to clear the air. There were indications 
that an improvement in business would come 
with the bountiful fall harvests. This was the 
situation when on August 1 the European War 
burst upon the world, bringing panic to financial 
circles, the closing of exchanges, and stagnation 
of business. As business was well liquidated, no 
serious national catastrophe occurred, and mat¬ 
ters soon began to adjust themselves to the new 
situation. 

The total barometer figures for the year tell of 
the severe depression, though they do not show 
the stagnation which occurred during the latter 
half of the year. 

Total Bank clearings fell from $170,800,000,- 
000 to $155,000,000,000. Failure liabilities 
were $360,000,000 the heaviest in 22 years. Pig 
iron production dropped to 23,000,000 tons. 

National Banks Other Banks 

Number in 1914. 7,525 19,240 

Bank capital. $1,058,192,335 $1,073,881,738 

Reserves. 1,546,182,628 Data incomplete 

Note circulation. 722,544,719 “ 

Deposits (individual).... 6,268,692,430 12,249,040,000 

Loans... 6,430,069,215 8,858,288,070 

Per capita circulation ... . 34.53 

Excess merchandise exports for 7 prior years.. . $3,525,480 

Excess gold exports for 7 prior years.19,810,669 


Although the readjustment in the United 
States was proceeding evenly, the outbreak of 
the European War brought an immediate crisis. 
Closing of Cotton and the Stock Exchanges as 
the result of an avalanche of foreign selling 
Claflin failure. Large shipments of gold to 
Europe. Unsatisfactory banking situation at 
home. High interest rates. Decline in com¬ 
modity prices. General industrial depression 
closing of factories and much unemployment. 


The shock resulting from the sudden outbreak 
of the World War created a financial crisis 
throughout the world. 


Issuance of $360,000,000 emergency currency 
through an extension of Aldrich-Vreeland Act. 
Clearing House Certificates amounting to 
$124,695,000 issued. Formation of $100,000,000 
gold pool. Leading European countries declare 
moratoria. In December, the New York Stock 
Exchange opened and the Federal Reserve Sys¬ 
tem was put into operation for the first time. 


Crisis lasted about four months. Stocks 
reached a low point on October 24, as measured 
by stock prices on outside market. With open¬ 
ing of Stock Exchange, a better feeling became 
prevalent. 


Anti-trust legislation dropped. The crisis 
emphasized the need of massing reserves such as 
the Federal Reserve System provided. 


The period preceding the crisis in 1920 was 
marked by the greatest expansion which has 
ever occurred in the United States. Industrial 
capacity increased 30%. Under the stimulus ol 
exorbitant grain prices and foreign demand, 
agricultural production was greatly expanded. 

Although there was some hesitation in busi¬ 
ness at the close of the World War, as the year 
progressed a post-war boom took place. Specu¬ 
lation in stocks and commodities reached fever 
pitch. 

A period of reckless extravagance swept the 
country. Automobile factories had orders 
booked six months ahead. Bradstreet’s index 
rose from 17.2244 to 20.1756. Bank clearings 
gained 26% over the previous year. 

In spite of the apparent great prosperity, 
underlying conditions were unsound. The banks 
found themselves in an over-extended position, 
with loans increasing. Money rates were high. 
Strikes were numerous. Although business was 
still showing an increase over the previous years, 
expressed in aollars, yet in actual volume there 
was a distinct slackening. Students of funda¬ 
mental conditions realized that a storm was 
ahead and began to prepare for the reaction. 

National Banks Other Banks 

Number in 1920 . 8,030 22,109 

Bank capital. $1,224,166,000 $1,813,019,000 

Reserves... 1,193,947,000 Data incomplete 

Note circulation. 688,178,000 

Deposits (individual).... 9,577,721,000 6,101,655,000 

Loans. 12,396,900,000 17,071,091,000 

Per capita circulation.. . . 56.79 

Excess merchandise exports for 6 prior 

years..... $15,606,408,502 

Excess gold imports for 6 prior years.... 695,389,782 


In 1920 the over-expansion and inflation 
which had extended over a period of five years, 
reached its peak and broke. During the first 
months, business continued at high speed. Un¬ 
satisfactory transportation conditions caused 
merchants to duplicate orders which accentuated 
the demand. Large stocks of goods piled up in 
this country and European demand slackened. 
Imports of goods increased heavily. Living 
costs went up until consumers were unable to 
pay the high prices demanded. The inevitable 
working of the law of action and reaction took 
place, starting with a sudden break in com¬ 
modity prices. 

Bradstreet’s index, which was 20.8690 in Feb¬ 
ruary dropped to 13.6263 in December. Wheat 
dropped from $2.75 to $1.70 and corn from 
51.70 to $.68 a bushel in the same period. A 
wave of contract cancellation threatened the 
very structure of business morale. 

The position of the former was particularly 
unfavorable due to low prices for agricultural 
products. 


The decline originated with a panic in Japan. 
Deflation spread to the United States, Great 
Britain, Canada and South America. 


Through operation of the Federal Reserve 
System a much more orderly readjustment took 
place. The System not only made it possible 
for temporarily embarrassed concerns to receive 
help but also afforded interdistrict accommoda¬ 
tion. 


Passage of Rural Credits Act and extension of 
life of War Finance Corporation. Change in 
eligibility requirements of Federal Reserve 
System. 

















































































































FUNDAMENTAL STATISTICS 


141 


marked change; a change for the better in time of 
depression, when present conditions are very un¬ 
satisfactory; or a change for the worse during a 
period of over-expansion when present conditions 
are apparently very satisfactory. 

As an illustration, however, of how the leading 
financial papers fail to recognize this principle, the 
following from an editorial of October 9, 1909, in 
what the writer considers America’s most valuable 
financial weekly, is of interest: 

“ It seems inconceivable folly to argue in favor of further 
meddling. If a man should protest, with sorrowful anxiety, 
that his bodily vigor is so great that he is really in fear about 
his future, and should forthwith set to ransacking the market 
for proprietary nostrums to keep himself regulated, he would 
be rated wanting in good sense. But what is a nation except 
a mass of persons, arid is prosperity a matter to be anxious about 
or to be afraid of ? The very question sounds absurd. Never¬ 
theless, in a speech, on entering California this week, our 
worthy President, after sounding the paean of coming pros¬ 
perity as loudly as language could do it, added that the 
difficulty is that whenever everybody is prosperous, when 
everybody is comfortable, then is the time when our old 
friend Satan steps in and helps along the evil cause; then is 
the time when we are apt to be inert and enjoy the things we 
have, without looking forward in the future and seeing that 
the evils will grow and ultimately swamp us.” 

Of course, our President was right and our es¬ 
teemed contemporary wrong. Great over-expan¬ 
sion is a matter to be feared. When a man or a 
nation is in a normal condition, there may be 
nothing to be anxious about; but when a man or a 
nation overworks or “ lives too high,” or in any way 
becomes strained or careless, trouble is sure to follow. 

This same principle is illustrated by interest 
rates.* For instance, when interest rates gradually 

* See the very valuable book on this subject by Professor Irving Fisher 
of Yale University: The Rate of Interest; The Macmillan Co. 


142 


BUSINESS BAROMETERS 


increase and surplus reserves gradually decrease 
after a period of depression, the combination is 
significant of improved present conditions; when 
commercial paper is discounted at 3|%, one may 
always be sure that the country is not prosperous, 
that many factories are idle and many men out of 
work. As the mills resume operation and as busi¬ 
ness becomes more active, money rates increase 
and surplus reserves decrease. Then, as money 
rates increase too much, and the surplus reserves 
decrease to very low figures, the change is signifi¬ 
cant of unsatisfactory future conditions. In other 
words, when money rates are below normal it shows 
business is dull, but may be better; and when 
money rates are above normal, it shows that busi¬ 
ness is good, but will soon be worse. 

Of course if this data were obtained by each in¬ 
vestor, merchant or banking house independently, 
it would require a force of clerks to collect, analyze 
and sort the mass of figures; but as the data may 
now be obtained from a central agency, all of the 
drudgery is eliminated. The investor or merchant 
may simply note the barometer figures as they are 
made up each week, thus keeping in constant touch 
with conditions; and by reference to the monthly 
figures once a month, these conditions may then be 
interpreted in accordance with the rules mentioned. 
Moreover, the average banker, merchant or in¬ 
vestor is satisfied to depend upon the Babsonchart, 
barometer figures and reports furnished by this 
central agency, simply making a personal detailed 
examination at desired intervals. 


FUNDAMENTAL STATISTICS 


143 


However, no matter what the time and money 
expended in studying fundamental conditions, the 
investigator always finds the subject absorbingly 
interesting, the more so because such studies indi¬ 
cate what may be expected of the future. 

If, during a period of depression, uncertainty 
and discouragement, the Babsonchart and indi¬ 
vidual charts show distinctly that the country is 
about to enter a period of over-expansion, investors 
buy stocks, merchants buy goods, and bankers 
extend loans. The result is that, when good busi¬ 
ness returns, such investors and merchants find 
that they have purchased very much below the 
prevailing prices and obtain many times the profit 
that they otherwise would. 

On the other hand, during a period of great ex¬ 
pansion and extravagance, when everybody is 
buying goods or securities and there is a general 
increase of indebtedness, if the Babsonchart and 
the other charts foretell a change for the worse, 
investors sell their securities for cash, merchants 
reduce their merchandise and outstanding credits, 
and bankers reduce loans or place a large part of 
them “ on call.” These statistics, therefore, both 
serve as an insurance against loss and also enable . 
men to be prepared to take advantage of the very 
low prices which are sure to prevail during the 
formation of an area of depression below the line 
of normal growth. 

Note.— Regarding the effect of War on Business 
conditions, see Appendix, page 444. 


CHAPTER V 

CONDITIONS AND EVENTS SINCE 1860 
1860 

T HOUGH this year ended in a panic, the com¬ 
paratively favorable conditions existing dur¬ 
ing the first six or eight months account for 
the fact that many of its figures are about normal. 
New railroad construction amounted ta 1,846 miles; 
while 821,223 tons of pig-iron were produced at an 
average price of $22.70 per ton. Bank clearings 
amounted to more than $7,231,143,000. The num¬ 
ber of failures was 3,676 with total liabilities of 
$79,807,000. Wages in general were high; and 
133,143 immigrants entered the country. 

With money rates high throughout the year, 
conditions became particularly strained in Novem¬ 
ber, when for the first time in the history of the 
country, clearing house certificates were issued. 
The total volume of foreign trade amounted to 
more than $681,000,000 with a considerable un¬ 
favorable balance. The index of English com¬ 
modity prices for the year was 2,713. 

On the stock exchange, prices were generally low. 
Certain conservative stocks rose from 59 in the 
spring to 93 in the summer. The production of 
wheat amounted to about 173,104,000 bushels at 
$1.37 per bushel; that of corn amounted to about 
838,700,000 bushels at 73 cents per bushel; and 
that of cotton amounted to 3,849,000 bales at 11 


EVENTS SINCE 1860 


145 


cents per lb. Panic conditions began in November 
with the election of Lincoln to the Presidency and 
the subsequent action of the Southern States 
towards secession. 


1861 

The depression existing at the end of 1860 con¬ 
tinued through the first six months of this year. 
Only 651 miles of new railroad were constructed; 
and only 653,164 tons of pig-iron were produced at 
an average price of $20.26 per ton. Bank clear¬ 
ings decreased to the very low figure of $5,915,- 
742,000. Failures amounted to 6,993 in number, 
with liabilities of $207,210,000. Wages continued 
high, while 142,877 immigrants came into the 
country. 

Money conditions were marked by high rates 
which dropped somewhat with the improving con¬ 
ditions of the last six months of the year, by a fur¬ 
ther issue of clearing house certificates, and by a 
suspension of specie payments. The total volume 
of foreign trade decreased to about $500,000,000. 
The index of English prices for the year was 2,751. 

Prices on the stock market were low throughout 
the year. Certain stocks, selling at 84 early in the 
year dropped to 62 in the fall. The production of 
wheat and corn decreased considerably. The 
number of bales of cotton amounted to 4,500,000. 
Wheat sold at $1.30, corn at $.60 a bushel** and 
cotton at 13 cents. In March the Morrill Tariff 
Act was passed, levying heavier duties and giving 
an impetus to industry. Thus, in spite of the be- 


146 


BUSINESS BAROMETERS 


ginning of the Civil War, conditions improved 
steadily after the middle of the year. 

1862 

This year shows a marked improvement over 
1861. While only 834 miles of new railroad were 
constructed, 703,270 tons of pig-iron were produced 
at an increased price of $23.92. Bank clearings 
rose to $6,871,443,000. Failures were only 1,652 
in number, with $23,049,000 of liabilities. 72,183 
immigrants entered the country. 

In money matters, currency was considerably 
inflated by paper issues and money rates were 
lower. The progress toward improved conditions 
was marked by a low volume of foreign trade 
amounting to about $380,000,000. The index of 
English commodity prices was 2,878. 

Transactions in the stock market increased and 
prices rose steadily. Certain stocks sold for 71 
in the spring and for 107 in the fall. Railroads 
prospered. Among the crops, cotton production 
amounted to 1,600,000 bales at $.31 per lb.; while 
wheat sold at $1.28 a bushel and corn at $.60 
a bushel. The most significant political feature of 
the year was the development of the policy of a 
heavy war tariff for revenue purposes. 

1863 

This was a year of expansion. There were 1,050 
miles of new railroad constructed, and 846,000 tons 
of iron produced at about $35 per ton. The bank 


EVENTS SINCE 1860 


147 


clearings increased to $14,867,597,000, and failures 
decreased to 495, with liabilities of only $7,900,000. 
Immigration amounted to 132,925. 

Money conditions were temporarily aided by 
measures of Congress providing for a further cur¬ 
rency inflation, and gold exportation was increased 
considerably. Foreign trade increased to over 
$447,000,000. The English index of prices was 
3,492 as against 2,878 for the preceding year. 

On the stock exchange a fever of speculation 
brought about a considerable increase in transac¬ 
tions and an advance in prices. Certain stocks rose 
from 106 in the spring to 153 in the fall. Wheat 
sold for $1.16 and corn for $.84; 450,000 bales of 
cotton were produced at an average price of $.67 
per lb. Railroad earnings increased and the first 
horse car line was constructed in New York. Con¬ 
gress passed *the Internal Revenue Act to increase 
the war revenue. In general the Northern troops 
were successful. 


1864 

Inflation was at full height in the beginning of 
the year, but showed marked evidences of insta¬ 
bility in the last months. Only 738 miles of new 
road were constructed, while pig-iron production 
amounted to 1,014,282 tons, and the price rose 
to the phenomenal point of $59 per ton. Bank 
clearings nearly doubled those of the preceding year 
amounting to more than $24,000,000,000. Failures 
increased slightly to 520 in number with liabilities 
of $8,579,000, while immigration totalled 191,114. 


148 


BUSINESS BAROMETERS 


Inflation of currency and exportations of gold 
continued to an abnormal degree and money rates 
rose. Foreign trade increased to over $475,000,000. 
The index of English prices was 3,787. 

Before the end of the year, prospects as indicated 
by these abnormal figures and conditions strained 
by the corner in connection with the stock of the 
Harlem River R.R., appeared so unsatisfactory 
that many began to sell their stocks. Average 
prices of securities for the year were higher than in 
1863. Rail stocks, selling at about 150 in January, 
rose to 177 in April, fell to 141 in October and rose 
again to 155 in December. Cotton production 
amounted to about 300,000 bales selling at the 
extraordinary price of $1.00 per lb. Wheat sold at 
$2.00 per bushel and corn at $1.44 per bushel. The 
general condition of inflation was marked further 
by high wages and increased dividend payments by 
railroads. In politics, Lincoln was re-elected to 
the Presidency. 


1865 

Conditions were unstable and unsatisfactory 
during this year. While 1,177 miles of new road 
were constructed, the production of pig-iron de¬ 
creased sharply to 831,770 tons, selling at $46 a 
ton. Bank clearings increased slightly to $26,- 
000,000,000. Failures numbered 530 with liabili¬ 
ties of $17,625,000. The number of immigrants 
decreased to 180,339. 

Money rates remained high, but did not increase. 
Paper money issues were somewhat contracted and 


EVENTS SINCE 1860 


149 


reserves were increased. Foreign trade fell off to 
about $400,000,000, and the index of English com¬ 
modity prices dropped to 3,575. 

On the stock exchange, the price of several stocks 
fell from about 160 in the spring to 125 later in the 
year. The production of cotton jumped up to 
2,269,316 bales, selling at $.83 per lb.; while wheat 
and corn were at $2.04 and $1.26 per bushel re¬ 
spectively. Conditions steadily declining during 
the first of the year improved somewhat with the 
surrender of Lee, but became unsteady again with 
the death of Lincoln. The year was, on the whole, 
one of panic. 


1866 

Depression followed the panic of the previous 
year. 1,716 miles of new railroad were constructed, 
while 1,205,663 tons of pig-iron were produced at a 
price of $46.84 per ton. Bank clearings increased 
slightly to $28,717,000,000. Business failures in¬ 
creased 200% amounting to 1,505 in number, with 
liabilities of $53,783,000. Immigrants coming to 
the country amounted to 332,577. 

Banking conditions were rather more settled, and 
money became easier with the close of the war and 
the slight improvement in fundamental conditions. 
Foreign trade increased to more than $780,000,000 
and exports of gold somewhat decreased. Com¬ 
modity prices in general were low. The English 
index figure was 3,564. 

In the stock market, the decline in prices of the 
preceding year continued. The average for certain 


150 


BUSINESS BAROMETERS 


stocks went as low as 99 and as high as 128. The 
first official crop report of the national government 
gave a production of 152,000,000 bushels of wheat 
sold at $2.20; 867,946,000 bushels of corn sold at 
$.90 per bushel, and 2,097,254 bales of cotton sold 
at $.43 per lb. Though, as shown by these figures, 
fundamental conditions appeared to be somewhat 
improving, still the surface conditions especially 
evident in the action of the stock market were 
decidedly depressed. 


1867 

During this year, though depression still existed, 
improvement was plainly visible. There were 
2,449 miles of new railroad constructed, and 1,305,- 
023 tons of pig-iron produced at $44 per ton. 
Bank clearings amounted to $28,675,159,000 and 
failures increased to 2,780 with liabilities of $96,- 
666,000. Immigrant aliens numbered 303,104. 

Monetary conditions showed a slight improve¬ 
ment over those of the previous year. Gold expor¬ 
tations decreased and rates were somewhat lower. 
Foreign trade amounted to $681,615,000 in volume 
with a balance of $61,337,308 of imports. The 
English commodity price index was 3,024. 

On the stock market, the price of the seven 
stocks ranged from 98 to 122. Railroad earnings 
improved. 2,519,554 bales of cotton sold at $.32 
per lb.; 768,320,000 bushpls of corn sold at $1.21 
per bushel; and 212,441,400 bushels of wheat, a 
considerable increase over the previous year, sold 
at $3.33 per bushel. Confidence was strengthened 


EVENTS SINCE 1860 


151 


by the purchase of Alaska and by the opening of 
new territories in anticipation of the coming pros¬ 
perity. 


1868 

This was a year of marked expansion. New 
railroad construction increased to 2,979 miles; and 
1,431,250 tons of iron were produced at $39.25 per 
ton. Bank clearings amounted to $28,484,288,000. 
The number of failures decreased to 2,608 with 
total liabilities of $63,694,000; and the number of 
immigrants decreased to 138,840. 

Money rates were slightly higher. The excess 
of gold exports amounted to $51,217,027, or almost 
five millions more than that of the previous year. 
The volume of foreign trade amounted to $649,- 
328,000, with a balance in favor of imports amount¬ 
ing to $87,000,000. The English commodity price 
index was 2,582. 

The market became active. Certain stocks rose 
from 108 to 144. While the cotton crop was much 
the same as that of the previous year, the wheat 
crop increased to 224,036,000 bushels selling at 
$2.43 per bushel; and the com crop increased to 
906,527,000 bushels selling at $1.23 per bushel. 
While general conditions were thus improving, the 
prices of stocks and the conditions of the stock 
market were rendered uncertain by the great con¬ 
test being waged between Drew and Vanderbilt for 
control of the Erie, in which the former won vir¬ 
tually by loading an issue of convertible bonds 
upon the Erie, and then immediately converting 


152 


BUSINESS BAROMETERS 


the bonds. This and certain other unfortunate in¬ 
cidents left the fundamental conditions of the 
stock market at the end of the year quite un¬ 
satisfactory. 


1869 

This was the year of the “ Black Friday ” panic, 
a panic of the stock market which, in spite of pros¬ 
perity in other branches of business, served to 
render conditions unsound. Miles of new railroad 
amounted to 4,615, and 1,711,287 tons of pig-iron 
were produced at $40.61 per ton. Bank clearings 
increased to $37,407,028,000. Failures numbered 
2,799 with liabilities increased to $75,054,000. 
The number of immigrants increased to 352,768. 

The money market was affected somewhat by 
the manipulations of the stock market. Money 
rates though firm were high. The excess of gold ex¬ 
portations decreased to only $17,990,000, while the 
balance of trade in favor of imports increased to 
$101,079,906. The English commodity price index 
was 2,666. 

On the market, the stocks, at 144 in the early 
summer, fell to 114 in the fall. The Union Pacific 
was completed and railroad earnings in general were 
good. In crops there were 3,000,000 bales of cotton 
at $.29 per lb.; 874,000,000 bushels of corn at $1.03 
and 260,146,900 bushels of wheat at $1.50. With 
the general conditions of expansion came a great 
westward movement. As was the case, however, 
with the Harlem corner in 1864, the “ Black Fri¬ 
day panic of this year seemed to create a wound 


EVENTS SINCE 1860 


153 


that would not heal, so that although business con¬ 
tinued to increase and surface conditions appeared 
to be more favorable, fundamental conditions grew 
more and more unsatisfactory every day. The 
leading bankers and merchants who were studying 
these underlying conditions and watching the re¬ 
lation between actual and normal figures, disposed 
of their securities and reduced their merchandise. 

1870 

Expansion continued through this year in spite 
of the unsatisfactory monetary conditions at the 
close of 1869. There were 6,070 miles of new road 
constructed, and 1,665,000 tons of iron produced at 
$33.23 per ton. Bank clearings, to be sure, declined 
to $27,804,000,000; and failures increased in num¬ 
ber to 3,546; but wages were high and immigra¬ 
tion amounted to 387,000. 

In the money market, rates remained firm, al¬ 
though money was easier than it had been in the 
preceding year. The excess of gold exports 
amounted to $42,673,184, while the excess of im¬ 
ports of merchandise decreased to $57,546,000, and 
the volume of foreign trade was $864,718,000. 
The English commodity price index was 2,689. 

The stock market, though steady, dropped during 
the year, so that the stocks selling for 120 in the 
first part of the year were selling at about 102 later. 
Wheat was somewhat decreased in both price and 
production as compared with 1869; but a phe¬ 
nomenal corn crop, amounting to 1,094,255,000 
bushels, sold at $1.02; and the cotton crop in- 


154 


BUSINESS BAROMETERS 


creased to 4,352,317 bales, selling at $.24 per lb. 
The year as a whole was looked upon by the busi¬ 
ness men as prosperous. 


1871 

In this year the miles of new railroad amounted 
to 7,379, while 1,706,793 tons of iron were produced 
at $35 a ton. Bank clearings rose to $29,300,000,- 
000. The number of failures fell to only 2,915, 
with liabilities of $85,000,000. The number of 
immigrants during the year was 321,350. 

Monetary matters showed the effects of the 
weakening underlying conditions. Money was not 
as easy as in the preceding year. The excess of 
gold exports amounted to $39,074,000; while the 
volume of foreign trade amounted to $1,033,463,- 
000, with an excess of imports of $112,759,000. 
The English commodity price index for the year 
was 2,590. 

On the stock exchange; stocks rose during the 
year from 103 to 117. Railroad gross earnings 
per mile were $9,040, an unusually high figure. 
Crops were not as good as those of the preceding 
year. Cotton amounted to less than 3,000,000 
bales selling at $.17 per lb., corn to 991,898,000 
bushels selling at $.77, and wheat to 230,722,400 
bushels selling at $1.60. Added to the decline in 
crops were other factors which hastened panic 
conditions which were soon to follow. The Chi¬ 
cago fire, coming in this year, shook confidence and 
helped to increase money rates. In political 


EVENTS SINCE 1860 


155 


circles much corruption sprang up; and the Tweed 
Ring exposures produced a still further disquietude 
and lack of confidence. 


1872 

The general decline which had begun in 1871 was 
in this year somewhat checked by a number of 
causes. New construction declined to the more 
nearly normal figure of 5,878 miles; and the pro¬ 
duction of iron increased to 2,549,000 tons selling 
at about $49. This great increase of iron produc¬ 
tion was probably due to the perfection of com¬ 
mercial methods of making Bessemer and open 
hearth steel, greatly increasing the demand for all 
grades of pig-iron, but especially the lower grades. 
Bank clearings increased to $33,844,000,000. Fail¬ 
ures numbered 4,069 with $121,000,000 of liabilities; 
404,806 immigrants came to this country. 

Money conditions were not altogether satisfac¬ 
tory. The banks were carrying a very small sur¬ 
plus reserve. The excess of exports of gold in¬ 
creased to more than $57,000,000. The volume of 
foreign trade amounted to $1,124,802,000, with an 
excess of imports amounting to $187,000,000. 
The English commodity price index was 2,835. 

Speculation was active on the stock exchange. 
Certain stocks dropped from about 110 to about 97. 
Gross railroad earnings per mile fell to $8,116. 
Crops were rather better than in the preceding 
year, but money rates were higher. Money was 
not easy, wages were high and strikes were dis¬ 
turbing confidence. In politics a revision of the 


156 


BUSINESS BAROMETERS 


tariff and a presidential election made conditions 
still more uncertain. Although this was a year of 
apparent prosperity, students of fundamental 
statistics, who had not already done so, now saw 
that the area of over-expansion was practically 
consumed, and immediately liquidated. 


1873 

The Boston Fire of November, 1872, precipitated 
the panic which overwhelmed the business world 
in this year. New construction declined to 4,097 
miles, though iron production increased slightly to 
2,560,000 tons and sold at $42.79 a ton. Bank 
clearings rose to $35,461,052,000. Business failures 
increased to 5,183 with liabilities over $100,000,000 
more than those of the year before. 459,803 immi¬ 
grants came into the country. 

Monetary matters were so unsatisfactory, and 
bank failures were so serious that clearing house 
certificates had to be issued. The excess of gold 
exports decreased from $57,000,000 to less than 
$5,000,000; while in volume foreign trade increased 
to $1,163,000,000 and in excess of imports it de¬ 
creased to $27,000,000. The English commodity 
price index rose to 2,947. 

On the stock exchange panic conditions were 
even more evident than elsewhere. Stocks fell as 
low as 75. Gross railroad earnings declined to 
$7,947 per mile. Crops were fair. The cotton 
production amounted to 4,000,000 bales and sold 
at $.20 per lb. Corn production amounted to 932,- 


EVENTS SINCE 1860 


157 


000,000 bushels, and wheat to 281,000,000 bushels; 
and sold at $.63 and $1.76 respectively. Money 
rates were very high, being 7% in New York for 
time loans. The Pacific Railroads, opened in the 
year 1869, were largely owned in New England and 
the promoters of both State Street and Wall Street 
had been borrowing money heavily of the insurance 
companies. These loans the insurance companies 
were now obliged to call. Moreover, the preceding 
year was the culmination of the Erie tragedy when 
James Fiske was shot and Erie stocks were struck 
from the New York Stock Exchange. Money had 
been very tight in 1872 and men of affairs clearly 
saw at the beginning of 1873 that it would be im¬ 
possible to continue -business under existing con¬ 
ditions and that a house cleaning would be neces¬ 
sary. Consequently, when crop Reports continued 
to point to small harvests, which later turned out 
to be about 100,000,000 bushels less than the pre¬ 
ceding year, and when the number of failures 
showed a distinct increase, things were allowed to 
seek their own level. That is, the large bankers 
and merchants withdrew their support and busi¬ 
ness began to decrease immediately. 

Conditions at this time are interesting to study 
as they show clearly the three steps in the progress 
of a decline and the precipitation of a crisis: first, 
the large bankers and merchants sell their securi¬ 
ties and reduce their merchandise, while the public 
is very optimistic; second, after some special event 
has taken place, in this case the Boston fire, which 
convinces these bankers and great merchants that 


158 


BUSINESS BAROMETERS 


the time has come for a house cleaning, they with¬ 
draw their support, although the people are still 
bullish and the ordinary store-keeper is borrowing 
money to buy goods; and third comes the panic it¬ 
self, which in the case of the great panic of 1873 
caused the failure of Jay Cooke & Co., and many 
other firms. This panic made imperative the 
closing of the New York Stock Exchange from 
September 18th to the 30th. This third step is the 
beginning of the decline in the eyes of the ordinary 
merchant, manufacturer and laborer. 'And in real¬ 
ity, until this third phase comes, there is no decline 
in surface conditions, although fundamental con¬ 
ditions have been unsatisfactory for a year or more, 
during which time bankers' and merchants who 
study fundamental conditions have been preparing 
for the depression. 


1874 

In this year panic passed into depression. New 
railroad construction declined to 2,117 miles; and 
the production of pig-iron fell off somewhat, to 
2,400,000 tons selling at only $30. Bank clearings 
declined to $22,900,000,000. Failures increased 
in number to 5,830; and immigration declined to 
313,339 persons. 

Surplus reserves in the banks increased. Gold 
exports showed an excess of $35,700,000 over im¬ 
ports; and of a total volume of foreign trade 
amounting to $1,131,988,000, exports exceeded 
imports by $7,756,000. The English index figure 
for commodity prices was 2,891. 


EVENTS SINCE 1860 


159 


Conservative stocks rose from the 75 of the pre¬ 
ceding year to 100 in the summer of this year, only 
to fall back to 93 in December. Gross railroad 
earnings per mile fell off to $7,513. Many roads 
were in the hands of receivers, and railway affairs 
were shaken by adverse legislation. Crops de¬ 
clined to a total for corn and wheat of 1,158,251,- 
200 bushels Granger laws, political investigations 
and the prosecution of certain prominent promot¬ 
ers, intended to place a check on the growth of 
public confidence. 


1875 

Depression continued throughout this year, and 
in fact through the succeeding three years. Only 
1,711 miles of railroad were constructed, the smallest 
number in ten years; and iron production dropped 
to 2,000,000 tons with the price at $26 a ton. Bank 
clearings showed a slight increase, amounting to 
$25,000,000,000. Failures, however, increased in 
number to 7,740 and in liabilities to $201,000,000. 
Immigration declined still further to 227,498. 

In monetary matters, the excess of gold exports 
was $39,000,000; the balance of trade was again 
“ in our favor ” to the amount of $7,784,000 
though the volume of trade had declined to $1,014,- 
110,000. The index figure for English commodity 
prices was 2,778. 

On the stock exchange stocks were irregular and 
declining in price. Stocks averaged 100 high and 
87 low. Gross railroad earnings amounted to 
$7,010 per mile, showing a considerable falling off, 


160 


BUSINESS BAROMETERS 


and both ths Erie and the Wabash defaulted 
interest on their bonds. Money continued high 
and confidence was greatly upset. The crops, 
however, were much better than in the preceding 
year. Cotton production amounted to 4,632,313 
bales at $.154 per lb. Corn amounted to 1,321,- 
069,000 bushels at $.84; and wheat amounted to 
292,136,000 bushels at $1.33. This fact of better 
crops together with the business depression, re¬ 
lieved the money market somewhat, and rates 
gradually decreased. 


1876 

In this year the depression reached its low ebb. 
Liquidation was very thorough. New construc¬ 
tion, to be sure, rose somewhat to 2,712 miles; but 
iron production decreased to 1,869,000 tons selling 
at $20.75 per ton. Bank clearings declined to only 
$21,597,000,000. Failures rose to 9,092 in number 
with liabilities of $191,117,786; and immigration 
declined to 169,986. 

Owing to the thorough liquidation, money was 
becoming easier. Only $7,555,000 of gold was ex¬ 
ported in excess of imports; and in foreign trade 
the decline in volume to $1,018,000,000 was due to 
a decline in imports which raised the excess of ex¬ 
ports to $163,319,000. The English commodity 
price index was 2,711. 

The tendency of the stock market was down¬ 
ward. Stocks, selling at 100 in the spring, dropped 
to 62 in the winter. Railroad earnings continued 
their decline to a gross per mile of $6,764. Crops 


EVENTS SINCE 1860 


161 


were about the same as the year before in yield, 
with prices slightly lower. Money rates in New 
York on time loans had declined to 5%; and 
abroad, to 3i%. In politics the Presidential elec¬ 
tion and the Hayes-Tilden dispute disturbed confi¬ 
dence. In fact, the public had become very much 
discouraged. All who had been connected with 
stocks had lost their money, prominent bankers and 
merchants had failed, railroads were carrying 
traffic at a loss, mills and factories were idle. 
Money rates were less than at any time since 1860. 

These facts showed that the pendulum had swung 
too far. But knowing that business conditions are 
like the pendulum which, after wide swings in either 
direction, tends to resume a normal position in re¬ 
sponse to the laws of gravity, investors and mer¬ 
chants who were studying the conditions and 
comparing figures saw clearly that this was the 
year in which to buy stocks, make plans for further 
extensions, and prepare for the period of improved 
conditions which was bound to come. In fact, the 
stocks which these investors sold at an average of 
144 a share in 1869, many now purchased at an 
average of 73 a share, while others who waited 
until the beginning of the following year purchased 
at an average price of 54. 

1877 

Though the depression continued, improvement 
in underlying conditions was well under way. New 
railroad construction amounted to 2,280 miles; and 
pig-iron production increased to 2,067,000 tons, 


162 


BUSINESS BAROMETERS 


selling at $19.25. Failures remained about the 
same in number as in the preceding year. Strikes 
were common owing to reductions in wages, and 
immigration continued its decline in numbers to 
141,857. 

In monetary matters the excess of gold exports 
decreased to $7,352,000; while the volume of for¬ 
eign trade increased slightly, and the excess of 
exports decreased to $140,000,000. Commodity 
prices, as indicated by the Economist’s index 
figure, declined to 2,715. 

On the stock exchange,* stocks dropped during 
the spring and summer to 54, but began to rise in 
the fall, selling at 75 in December. Gross rail¬ 
road earnings per mile declined to $6,380; and net 
per mile to $2,307. Crops were good: 4,773,865 
bales of cotton sold at $.118 per lb.; 1,342,558,000 
bushels of corn sold at $.59 per bushel; and 364,- 
194,000 bushels of wheat sold at $1.63 per bushel. 
In politics, the silver agitation, as usual with all 
currency disputes, tended to retard improvement. 
But though the country was in extreme depression 
at the beginning of the year, still, with the good 
crops, railroad earnings and confidence improved, 
and money rates gradually decreasing, Christmas, 
1877, was a time of thanksgiving for many who had 
escaped being crushed during the preceding five 
years. 

1878 

In spite of the signs of improvement in the year 
preceding, this year, though continuing the im- 

* See page 35. 


EVENTS SINCE 1860 


163 


provement, was still in depression. New construc¬ 
tion increased to 2,629 miles; and iron production 
rose to 2,301,000 tons with the price per ton at 
$17.00. Bank clearings increased to $27,814,000,- 
000. Failures increased in number to 10,478, and 
in liabilities to $234,000,000. Immigration de¬ 
clined still further to the low point of 138,469. 

Monetary affairs reflected the improvement 
which was under way. The volume of foreign trade 
remained the same as in the preceding year; but 
the excess of exports increased to $305,000,000, and 
the gold movements showed an excess of imports 
amounting to $1,822,000. The London Econo¬ 
mist’s commodity figure of 2,554 indicated the 
general tendency of commodity prices to remain 
low. 

The stock market was still unsteady and inactive. 
Only 39,875,000 shares were traded on the New 
York Exchange. Stocks rose from 69 in the spring 
to 104 in the fall. Net railroad earnings per mile, 
however, increased to $2,375. The crops of corn 
and cotton were about the same as those of the 
preceding year; while the wheat crop increased to 
420,000,000 bushels and dropped in price to $1.24 
per bushel. In politics, the silver dispute was 
continued over the Bland-Allison bill; and certain 
changes were made in the Bankruptcy Law. On 
the whole, the confidence of the public and of the 
business world was returning. 

1879 

During this year, depression passed into over-ex- 


164 


BUSINESS BAROMETERS 


pansion. New construction jumped to 4,746 miles; 
and iron production increased to 2,742,000 tons, 
selling at $22.82. Bank clearings increased to 
$39,000,000,000. Failures decreased remarkably to 
6,658 in number, and only $98,149,000 in liabili¬ 
ties. Immigration increased somewhat to 177,800 
in number. 

The volume of foreign trade increased to $1,278,- 
762,000, the excess of exports amounted to $251,- 
557,000 and the excess of gold imports to $74,652,- 
000. Commodity prices were still ' low. The 
English index figure for the year was 2,225. 

On the stock market, the stocks rallied from 69 
to 104, and transactions nearly doubled. Net 
railroad earnings increased to $2,610 per mile. 
Crops were as follows: cotton, 5,755,000 bales sel¬ 
ling at $.108 per lb.; corn, 1,548,000,000 bushels 
selling at $.47 per bushel; and wheat 449,000,000 
bushels selling at $1.24 per bushel. In New York, 
time loan money rates were at 5%, and in Europe' 

^ 4 %. In accordance with the Specie Payments 
Act of 1875, specie payments were again resumed 
in this year. In fact, the entire year witnessed an 
improvement so marked that at the end of the 
twelve months, mills were in full operation, all labor 
was employed, and the entire country was in a very 
prosperous condition. 


1880 

This was the first of a series of three years of 
marked prosperity. New railroad construction in- 


EVENTS SINCE 1860 


165 


creased to 6,876 miles, and pig-iron production 
amounted to 3,835,000 tons selling at $30 a ton. 
Bank clearings jumped to $50,000,000,000. Fail¬ 
ures decreased still further to only 4,735 in number 
or .63 of 1% of all‘the firms in business, with one 
exception the lowest point on record. The num¬ 
ber of immigrant arrivals increased to 457,000. 

The volume of foreign trade increased to $1,586,- 
490,000, and the balance “ in favor of ” the United 
States amounted to $192,876,000. Excess of gold 
imports amounted to $70,582,000. Commodity 
prices improved as illustrated by the English in¬ 
dex figure of 2,577. The average surplus reserve 
of the New York banks declined from $6,800,000 
in 1879 to $6,100,000 in this year. 

On the New York Stock Exchange, transactions 
increased from 72,000,000 to almost 98,000,000 
shares. The stocks rose from 99 to 123. Net rail¬ 
road earnings increased to $3,029 per mile. Crops 
were excellent; 6,606,000 bales of cotton selling at 
$.115 per lb.; 1,717,434,000 bushels of corn selling 
at $.55 per bushel and 499,000,000 bushels of wheat 
selling at $1.30 per bushel. Confidence reigned 
throughout the country; consolidations were in 
progress; new industries were started; new rail¬ 
roads were projected; and every one was elated 
over the fact that the country was once more pros¬ 
perous. Moreover, Garfield, the candidate for the 
Republican party, always representative of busi¬ 
ness interests, was elected President in November. 
Money was constantly in more demand, and the 
rates were gradually increasing. 


166 


BUSINESS BAROMETERS 


1881 

Although the general public considered this year 
one of great prosperity, there were certain events 
which caused the barometers of fundamental con¬ 
ditions to begin to decline, and before the year 
closed, said fundamental conditions were unsatis¬ 
factory. Thus, new construction rose to the ab¬ 
normal figure of 9,778 miles; while production of 
pig-iron increased slightly and the price declined. 
Clearings jumped to more than $63,000,000,000. 
Failures increased in number to 5,582. * The num¬ 
ber of immigrant arrivals amounted to 669,431. 

Money conditions, too, were not altogether 
satisfactory. The volume of foreign trade de¬ 
creased slightly, and the balance “ in favor of ” 
this country decreased as did the excess of gold im¬ 
ports. In the New York banks the surplus re¬ 
serve fell to $4,500,000. Commodity prices were 
somewhat lower as indicated by the English index 
figure of 2,376. 

Transactions on the New York Stock Exchange 
amounted to more than 114,000,000 shares. Stocks 
selling at an average price of 125 in January, rose 
to 134 in June, and fell again to 121 in December. 
Railroad net earnings declined slightly to $2,928 
per mile, being due in part to the Trunk Line Rate * 
War. Money rates abroad increased to 4% and 
at home to 5j% time loans. The crops de¬ 
creased considerably in yield, wheat and corn to¬ 
gether amounting to less than 1,600,000,000 
bushels. Tremendous stock issues were being 
floated, and large stock dividends were being de- 


EVENTS SINCE 1860 


167 


dared. While to outsiders everything appeared to 
be very prosperous, yet to the careful student it 
was plain that conditions were not what they 
should be, and needed only some sudden disturbing 
event to start disaster, such an event as the Harlem 
corner in 1864 and the Boston fire in 1872. This 
sudden event turned out to be the shooting of 
President Garfield on July 2, 1881, after which 
event, the bankers and merchants who kept care¬ 
ful watch of conditions decided to sell. 


1882 

Fortunately for those who had not already liqui¬ 
dated, prosperous conditions continued in many 
of the important lines during this year and the 
next. New railroad construction amounted to 
11,599 miles, or next to the largest new mileage 
for anv year in the history of the country; and 
iron production was correspondingly inflated to 
4,623,323 tons, selling at $25.77 per ton. Bank 
clearings decreased slightly to $61,000,000,000. 
Failures numbered 6,738, with liabilities of $101,- 
547,564. Immigration rose to the abnormal figure 
of 788,992. 

Monetary matters were also uncertain. Gold 
movements showed a return of excess of exports 
amounting to more than $25,000,000; while the 
volume of foreign trade increased to $1,520,000,000 
and the excess of exports declined to $15,138,000. 
The surplus reserve of the New York banks de¬ 
clined still lower than in 1881, to $3,500,000. The 


168 


BUSINESS BAROMETERS 


London Economist’s commodity price figure for 
the year was 2,435. 

On the New York Stock Exchange, transactions 
increased to 116,300,000 shares. Nine stocks fell 
to a low point of 113 in the early summer and 
rose again to 126 in August. Railroad earnings 
decreased to a net per mile of $2,670. Crops, how¬ 
ever, the real redeeming feature of the year, were 
better than in 1881. The cotton crop of 6,950,- 
000 bales sold at $.115 per lb. Corn amounting to 
1,617,000,000 bushels, sold at $.77 and wheat, 
amounting to 504,000,000 bushels, sold at $1.32 
per bushel. Owing chiefly to these crops, although 
a decline had set in, it was not perceived by the 
general public. As mentioned in the account of 
the year 1873, there are three steps in every de¬ 
cline, and the second, that in which the leaders 
withdraw their support, had not come, for this 
was the year in which Jay Gould made his famous 
exhibit of securities. As will be seen by referring 
to the newspapers of that day, it was clearly under¬ 
stood by students of conditions that a distinct de¬ 
cline had begun, and Gould probably knew this 
as well as any man. Therefore, although he was 
preaching that the conditions were perfectly sound 
and that still greater prosperity was ahead, he 
himself was doubtless unloading and liquidating 
with all possible speed in preparation for the public 
withdrawal of his support later. Moreover, the 
banks were aiding their directors by keeping down 
money rates although the demand for money was 
very great. Students of fundamental statistics, 


EVENTS SINCE 1860 


169 


however, could not be misled, and knowing that 
the area of over-expansion was rapidly being con¬ 
sumed, prepared for trouble. 

1883 

Though nominally considered a year of pros¬ 
perity, this was in truth a year of decline and in¬ 
stability of underlying conditions. New construc¬ 
tion fell off to 6,818 miles, and iron production to 
4,595,000 tons. Bank clearings in this year, for the 
first time published for the whole country instead of 
for New York alone, amounted to $51,731,472,000. 
Failures increased in number to 9,184 and in lia¬ 
bilities to $172,800,000. Immigration also showed 
a decline. 

Money conditions were supported by a volume 
of foreign trade amounting to $1,482,275,000. 
The balance in favor of this country increased to 
$108,000,000, and excess of gold imports due to 
gold purchases from abroad amounted to $16,- 
000,000. The New York bank reserves were still 
low, being about $4,200,000. The English com¬ 
modity price index fell to 2,343. 

The stock market held up remarkably well, 
although the high prices were maintained only 
through manipulation and in order to allow the 
insiders the opportunity to liquidate. Stocks 
fell from 119 to 109. Railroad earnings increased 
slightly both in gross and net. Money rates in 
New York averaged 5j% and in Europe, 3|%. 
Crops, too, were poorer than in the preceding year, 
the yield of wheat and corn combined amounting 


170 


BUSINESS BAROMETERS 


to less than 2,000,000,000 bushels. On the whole, 
these facts, added to agitation over tariff and in¬ 
ternal revenue questions, rendered business condi¬ 
tions abnormal and unsound, and clearly foretold 
the panic about to follow. 

1884 

The unsound conditions of the preceding year 
were reduced, in this year, to panic conditions by 
the great Ward and Grant failure on May 6, to¬ 
gether with the failures of Henry Villard and James 
R. Keene. New construction declined to 3,973 
miles, and iron production was reduced by about 
500,000 tons. Bank clearings decreased to $44,- 
000,000,000. Failures rose to 10,968 in number, 
with $226,000,000 of liabilities. Immigration also 
declined to 500,000 in number. 

In foreign trade, both exports and imports de¬ 
creased. The balance “ in favor of ” this country 
was $120,000,000; but gold movements showed an 
excess of exports amounting to $12,990,000. The 
New York banks held a large surplus reserve of 
$20,800,000. Commodity prices fell as illustrated 
by the English index figure of 2,195. 

On the stock market, artificial support being re¬ 
moved from money conditions, stock prices fell 
rapidly. Stocks sold at 113 in February, and 85 
in the winter months. Net railroad earnings de¬ 
clined to $2,318 per mile. Crops, however, were 
again good, corn and wheat amounting to over 
2,300,000,000 bushels. If it had not been for the 
good crop reports during this year, probably stocks 


EVENTS SINCE 1860 


171 


would have declined very much further. As it was, 
even the election of Grover Cleveland by the 
Democrats in November did not seem to break the 
market very severely. 

1885 

Depression, as usual, followed the panic, in this 
year. Only 3,131 miles of new railroad were con¬ 
structed; and iron production declined to 4,044,000 
tons, selling at $18. Bank clearings declined to the 
low figure of $41,474,000,000. Failures were 
slightly lower than in 1884 both in number and in 
liabilities. Immigration figures declined to 395,- 
346. 

In monetary matters, the volume of foreign trade 
decreased to $1,276,118,000 and the balance “in 
favor of ” the country decreased to $100,000,000. 
Gold movements showed an excess of imports of 
$12,200,000. The average surplus reserves in the 
New York banks rose to the enormous sum of 
$48,000,000. The English commodity price index 
was 2,023. 

The stock market was comparatively active. 
Stocks rose from 86 to 111. There was a consider¬ 
able issue of new stocks and bonds amounting to¬ 
gether to $567,500,000. Railroad earnings dropped 
to the low figure of $2,185 net per mile. Money 
rates' in New York dropped from 4% to 3% on 
time loans. The crops were rather better than in 
the preceding year, but prices were considerably 
lower. In politics, the silver agitation rather in¬ 
creased the general weight of depression which 
existed throughout the year. 


172 


BUSINESS BAROMETERS 


1886 

General depression continued in this year, though 
improvement was well under way before its close. 
New construction jumped up to 8,128 miles; while 
iron production increased to 5,683,000 tons, selling 
at $18.70. Bank clearings, too, increased to $49,- 
000,000,000 and failures decreased somewhat both 
in number and in liabilities. Immigration de¬ 
creased slightly to 334,203. 

In the monetary field money was easier. The 
volume of foreign trade remained about the same; 
but the balance between exports and imports of 
both gold and commodities was much reduced. 
The abnormal average surplus reserve of the New 
York banks in 1885 was in this year reduced to 
$14,200,000. Commodity prices in general were 
the same as indicated by the Eriglish index figure 
of 2,023. 

The New York Stock Exchange was active during 
this year. Transactions amounted to more than 
100,000,000 shares, and stocks rose from 106 to 
118. Money rates in New York rose to 4}% and 
the banks began pretty generally to buy bonds. 
Railroad earnings improved both in gross and net; 
and crops were about the same as in the preceding 
year in yield, but somewhat lower in prices. Cot¬ 
ton sold for $.092 per lb., corn for $.52 per bushel 
and wheat for $.89 per bushel. A period of im¬ 
provement had commenced, and although many 
small merchants were only beginning to feel the 
effects of the great depression, true conditions were 
distinctly more than normal and the pendulum 


EVENTS SINCE 1860 


173 


was swinging too far the other way. In view of 
this, stocks began to rally and plans for extensions 
and large undertakings were again discussed. 
Moreover, the defeat of the various bills which were 
introduced into Congress for the reduction of the 
tariff caused a special increase of confidence among 
manufacturers, wholesalers and bankers. Money 
rates also, remaining normal, greatly encouraged 
new enterprises. 


1887 

This year ushered in a new period of expansion. 
New railroad construction amounted to 12,983 
miles, the largest figure in the history of the coun¬ 
try; while pig-iron production increased to 6,417,- 
148 tons selling at $21 a ton. Bank clearings rose 
to $51,000,000,000, and failures amounted in num¬ 
ber to 9,634 or .90 of 1% of all the firms in business. 
Impelled by the tide of expansion, immigration 
increased to 490,000. 

The volume of foreign trade also showed a 
marked increase due chiefly to an increase in im¬ 
ports, as is generally the case in a period of expan¬ 
sion. Consequently the balance of trade favoring 
exports decreased to $6,000,000; but the excess of 
gold imports increased to $35,700,000. Surplus 
reserves were still further reduced, and prices began 
to rise. The London Economist’s commodity in¬ 
dex for the year was 2,087. 

The stock market was rather less active than in 
the preceding year, and the prices of stocks fell 
from 125 to 112 in the summer and fall, owing 


174 


BUSINESS BAROMETERS 


probably in part to the approaching presidential 
election and the doubt and hesitation which is 
always reflected in business circles with the ap¬ 
proach of this process in politics. But railroad 
earnings improved, the net per mile being $2,444, 
and money rates were normal. Moreover, while 
the yields of corn and wheat together amounted to 
less than 2,000,000,000 bushels, the cotton yield 
increased from 6,500,000 bales of the year before, 
to 7,000,000 in this year. In politics, government 
control of railroads was inaugurated' in this year 
by the passing of the Interstate Commerce Act. 

1888 

Owing to satisfactory fundamental conditions, 
all business made rapid progress in this year in spite 
of the fact that it was a “ presidential year.” New 
construction amounted to 7,066 miles, and iron 
production increased slightly to 6,489,000 tons. 
Bank clearings were about normal at $49,541,000,- 
000; and failures, though increased in numbers, 
were decreased in total liabilities. The number of 
immigrant arrivals increased to 546,000. 

Monetary conditions were interesting. While 
exports decreased, imports increased and the total 
volume of foreign trade decreased to $1,417,000,000. 
Consequently there was at the end of the year a 
balance of trade “ unfavorable ” to the United 
States amounting to $33,600,000 and a resulting 
excess exportation of gold amounting to $23,500,- 
000. Domestic money rates remained at 5%, but 
surplus reserves in New York banks increased to an 


EVENTS SINCE 1860 


175 


average reserve of $17,000,000. The English index 
figure for commodity prices rose to 2,458. 

The inactivity of the stock market during this 
year can probably, as in the fall of 1887, be ascribed 
largely to the approaching presidential election. # 
Early in the year, stocks stood at a low point of 
113; after the election they bounded up to 126 in 
December. In fact, with thb election of the Re¬ 
publican candidate, General Harrison, business in 
general showed a marked improvement. The net 
railroad earnings for the year amounted to $2,045 
per mile, a low figure. Total crops, too, showed no 
great increase, though the total wheat and corn 
crops amounted to 2,400,000,000 bushels. 

1889 

This was a year of prosperity. New railroad con¬ 
struction was normal at 5,695 miles; while iron pro¬ 
duction increased to 7,600,000 tons selling at $17.76 
a ton. Bank clearings rose to $56,000,000,000, and 
failures increased somewhat. Immigration de¬ 
clined to 444,000. 

The volume of trade was only slightly larger 
than in the preceding year with an unfavorable 
balance again amounting to an excess of imports 
equal to $56,584,000. Exportations of gold, how¬ 
ever, continued to exceed imports, in this year, by 
$38,900,000. Surplus reserves of the banks were 
somewhat below normal. As indicated by the in¬ 
dex figure of the London Economist, which was 
2,362 for this year, commodity prices had some¬ 
what dropped. 


176 


BUSINESS BAROMETERS 


On the stock exchange, transactions showed an 
increase. Stocks rose from 123 in the spring to 
136 in the fall. Domestic time loan rates con¬ 
tinued at 5%, while those abroad were at 3%. 
The net earnings of railroads still remained low. 
Crops, however, were excellent, especially those of 
corn and cotton, which were the largest in the his¬ 
tory of the country thus far. The cotton crop of 
7,472,511 bales sold at $.106 per lb.; the corn crop 
of 2,112,892,000 bushels sold at $.44 per bushel; 
and the wheat crop of 490,560,000 bushels sold at 
$.91. 


1890 

In this year, sound prosperity changed to an 
“ uncertain prosperity,” which was to continue for 
two years longer, during which time, while surface 
conditions looked satisfactory, fundamental condi¬ 
tions were far from sound. New construction 
amounted to 5,656 miles, and pig-iron production 
increased to 9,000,000 tons, selling at $18. Bank 
clearings also rose to $60,800,000,000, and failures 
increased only slightly. Immigration showed little 
change. 

In monetary matters, the volume of foreign 
trade increased to $1,680,000,000 and the excess 
of exports amounted to $34,000,000. Exports of 
gold exceeded imports by only $3,700,000. Surplus 
reserves in the New York banks fell to the low 
average figure of $3,700,000. The English com¬ 
modity price index figure, 2,247, shows a still 
further drop in prices. 


EVENTS SINCE 1860 


177 


The stock market conditions were peculiar. 
Railroad earnings rose to a net per mile of $2,162. 
The cotton crop was unusually large, amounting to 
8,600,000 bales; but the wheat and corn crops fell 
off considerably, amounting together to only 1,900,- 
000,000 bushels. Money rates in this country rose 
to 6% and abroad to 4%. Ten stocks which re¬ 
mained above 130 until the fall, suddenly dropped 
then to 118. This drop marked what may be 
called a “ surface panic,” brought on by the great 
Baring Failure at which time clearing house cer¬ 
tificates were issued to relieve the pressure on the 
banks. Public confidence and courage, greatly 
agitated by this panic, was still further disturbed 
during the year by the political discussions which 
ended in the passing of the McKinley Tariff Act 
and the Silver Purchase Act. 

1891 

In spite of the generally favorable surface con¬ 
ditions of this year, confidence was not fully re¬ 
stored. New railroad construction decreased to 
4,620 miles and pig-iron production fell off nearly 
a million tons. Bank clearings also declined to 
$56,700,000,000; and failures increased to 12,273 
in number with liabilities of $189,868,000. Immi¬ 
gration increased to 560,319. 

Foreign trade continued to develop, amounting 
in volume to $1,798,830,000 with a balance of 
$142,000,000 in favor of the United States. Gold 
exports increased correspondingly to an excess over 
imports of $34,000,000. Surplus reserves in the 


178 


BUSINESS BAROMETERS 


New York banks rose to $11,000,000. The English 
index figure of commodity prices declined to 2,207. 

The listing of new securities, which had amounted 
to the large figure of $1,122,800,000 in 1890, de¬ 
clined in this year to $476,500,000. The Exchange 
was dull. Ten stocks sold around 115 until the 
late summer, when they rose to 128. Railroad 
earnings remained much the same as in the year 
preceding. Crops, however, were phenomenally 
large. The cotton crop of 9,000,000 bales sold at 
$.086 per lb. The corn crop of 2,000,000,000 
bushels sold at $.67 per bushel. The wheat crop 
of 612,000,000 bushels sold at $1.05 per bushel. 
These fine crops caused the newspapers to be es¬ 
pecially bullish, and enabled bankers and mer¬ 
chants to keep money rates from advancing further 
and to bolster up the market in order to unload 
their securities and merchandise. In fact, most 
people believed this a very satisfactory year. 
Students of fundamental statistics, however, clearly 
saw that the area of expansion was about con¬ 
sumed and prepared for trouble. 

1892 

The prosperity of this year, so-called, was 
largely due to artificial causes. New construction 
amounted to only 4,584 miles, while the production 
of pig-iron rose to more than 9,000,000 tons and its 
price fell off to $12.74 per ton. Bank clearings in¬ 
creased to $62,011,000,000; failures declined in 
number to 10,344 and in liabilities to $114,000,000, 
and immigration figures rose to 623,000. 


EVENTS SINCE 1860 


179 


Although the commodity exports exceeded im¬ 
ports by $97,000,000, still there was a net exporta¬ 
tion of gold amounting to $58,000,000. The New 
York banks’ average surplus reserve amounted to 
$15,600,000. Commodity prices in this country, 
as indicated by Bradstreet’s index figure of $7.78 
which began in this year, were fairly high, while in 
England the index figure of 2,107 indicates that 
there they were low. 

On the New York Stock Exchange, transactions 
increased to 86,000,000 shares. Ten stocks fluc¬ 
tuated between 126 and 135, beginning and ending 
the year at about 130. Net railroad earnings per 
mile declined to $2,068. Crops were much smaller 
than in the preceding year, corn and wheat together 
amounting to less than 2,150,000,000 bushels. In 
short, it was clearly evident to students of fun¬ 
damental statistics that the area of expansion was 
more than consumed, and those who had not 
already liquidated, sold securities, merchandise and 
everything else possible in preparation for a period 
of depression. 


1893 

Questionable prosperity passed readily into panic 
with the great failure of the National Cordage Co. 
on the 4th of May. The collapse was complete. 
New construction dropped to 2,789 miles; and iron 
production amounted to only 7,000,000 tons. 
Bank clearings in like manner fell off to $54,143,- 
000,000; failures increased to 15,000 in number 
with liabilities of more than $347,000,000; and 


180 


BUSINESS BAROMETERS 


immigration, though not so quickly affected as 
these other subjects, declined to 502,917. 

In monetary affairs, both exports and imports 
of commodities declined; and while the excess of 
exports increased slightly to $99,600,000, the excess 
of gold exports declined to $6,700,000. The aver¬ 
age surplus reserve of the New York banks in¬ 
creased to $21,600,000. Bradstreet’s index figure 
of American prices dropped to $7.53, while the 
English figure rose slightly to 2,113. 

The stock exchange was dull and, of eourse, de¬ 
clining. Ten stocks dropped from 135 to 102. 
Railroad earnings showed no particular change 
from the year before; but commercial paper rates 
in New York averaged 7%. Unfavorable crop re¬ 
ports, which had increased the collapsing tendency 
during the year, were fully substantiated by the 
final reports. To be sure, cotton was a little better 
than in the preceding year, and corn showed only a 
slight decline, but wheat had dropped off from 
516,000,000 bushels to 396,000,000 bushels, selling 
at the decreased price of $.74 a bushel. In fact, 
support of all kinds had been withdrawn, and every 
commodity, including money, was allowed to seek 
its own level. 

1894 

In this year the inevitable period of depression 
following a severe panic began in earnest. New 
railroad construction declined to only 2,264 miles, 
and the production of iron amounted to only 
6,700,000 tons. In like fashion bank clearings de¬ 
clined to $45,460,000,000; failures were still high, 


EVENTS SINCE 1860 


181 


at 13,885 in number, though liabilities decreased 
to $173,000,000; and immigration declined to 
314,467. 

Monetary matters showed the same depression. 
The volume of foreign trade declined to $1,501,415,- 
000 while the excess of exports increased (through 
a decided decrease in imports) to $149,000,000. 
Excess of gold exports jumped up to $80,000,000 
and bank reserves in the New York banks in¬ 
creased to $45,900,000. Commodity index prices 
dropped in America to $6.68 and in England to 
2 , 002 . 

On the New York Stock Exchange only 49,000,- 
000 shares were traded. The ten stocks rose to 115 
in the spring and fell back again to about 106 in 
the winter. Railroad earnings fell to $1,803 per 
mile, net, the lowest figure on record. Crops, too, 
were exceptionally poor. Cotton, to be sure, 
amounted to 9,900,000 bales in yield, but it sold at 
the low price of $.07 per lb.; and corn and wheat 
together yielded less than 1,673,000,000 bushels. 
In reality this year witnessed the greatest crop 
failure in the history of the country. The crops 
had fallen below 1,600,000,000 bushels during the 
70s, yet a very much smaller area was then under 
cultivation and conditions were entirely different. 
As figures clearly show, a small increase or decrease 
in crops does not affect business excepting senti¬ 
mentally; but a great failure such as was witnessed 
in 1894 gives the country a shock from which it may 
take several years to recover. In addition to the 
crop failures, the Pullman strike occurred in this 


182 


BUSINESS BAROMETERS 


year, and the Wilson bill affecting the tariff was 
also passed; in fact, 1894 was apparently the worst 
year since the Civil War. 

1895 

This year began in great gloom. The depression 
of the preceding two years, during which so many 
bankers and merchants had failed and one-third 
of the total railroad mileage of the United States 
had fallen into the hands of receivers, began to 
have its effects upon all labor and even upon the 
most humble storekeeper. Mills were shut down, 
great poverty existed in the cities, and distress was 
everywhere felt. New railroad construction de¬ 
clined to 1,938 miles. Iron production, however, 
had improved both in yield and in price, amounting 
to 9,000,000 tons and selling at $10.86 a ton. Bank 
clearings, too, showed a gain to $53,000,000,000; 
and failures decreased slightly in number. Only 
279,948 immigrants entered the country. 

The total volume of foreign trade showed a slight 
increase over the preceding year, but the balance 
“ in favor of ” the United States declined to $23,- 
000,000. Still, the gold exports continued in large 
amounts, exceeding the imports by $70,600,000; 
and the surplus reserves, though reduced from the 
figures of the year before, wele still high. Com¬ 
modity prices were slightly lower than in 1894 
in this country, and dropped somewhat in England. 

The stock market was rather more active; but 
again the ten stocks rose from 105 in March to 
about 121 in September only to fall back to about 


EVENTS SINCE 1860 


183 


108 in the winter. Railroad earnings were $1,804 
per mile net, or practically the same as in 1894. 
But crops were somewhat improved. The cotton 
yield of 7,000,000 bales sold at $.074 per lb.; the 
corn crop of 2,000,000,000 bushels sold at $.48 per 
bushel; and the wheat crop of 467,000,000 bushels 
sold at $.67 per bushel. And, added to the fair 
crops, there was the low domestic money rate of 
4% to lend aid to an improvement. In fact, con¬ 
ditions would doubtless have taken a turn for the 
better had it not been for the very unfortunate 
condition of finance, and the great exportation of 
gold. Although President Cleveland did every¬ 
thing within his power to uphold the gold standard 
and the credit of the United States, the drain was 
too heavy, especially after his famous \enezuela 
message, and the threatened possibility of war 
with our greatest foreign creditor, England. 

1896 

This year business was still depressed from the 
panic of 1893 and the heavy gold exportations of 
1894-5. Railroad mileage increased to 2,067 miles, 
129 miles above the low figure for 1895; and 
iron production declined to 8,600,000 tons selling 
at $10.29 a ton. Bank clearings decreased to $51,- 
000,000,000. Failures increased considerably to 
15,000 in number with total liabilities of more than 
$226,000,000. Immigration amounted to 343,267. 

In monetary matters, the volume bf foreign trade 
increased to $1,687,000,000 and the excess of ex¬ 
ports jumped up to $324,000,000. In gold move- 


184 


BUSINESS BAROMETERS 


merits, imports exceeded exports $46,400,000. The 
American index of commodity prices dropped to 
the low point of $5.91. 

The New York Stock Exchange was dull in trans¬ 
actions, but listed more than $1,000,000,000 of new 
securities about equally divided between bonds 
and stocks. The ten stocks once more fluctuated 
between 113 and 99 in August. Railroad earnings 
increased to $1,840 per mile net. Money rates on 
time loans in New York, owing to the currency 
troubles of the preceding year and the spTing of this 
year, rose from 4% to 6%. Though the wheat crop 
itself declined somewhat, the total of corn and 
wheat amounted to more than 2,700,000,000 bushels 
and cotton yielded 8,522,000 bales. Therefore, 
although there were no signs of better times in sur¬ 
face conditions, fundamental conditions were be¬ 
coming much sounder. Had it not been for the 
alarm felt at the Democratic nomination of Bryan 
in June, this would have been from its very begin¬ 
ning a year of distinct improvement; and when the 
election of McKinley in the fall of 1896 had re¬ 
moved this cause of distrust, bankers and mer¬ 
chants who were studying the situation became con¬ 
vinced that a change for the better was imminent. 
In fact, it was evident from a study of fundamental 
statistics that the area of depression was about 
consumed, and a period of over-expansion due. 
They therefore purchased securities and merchan¬ 
dise in large quantities, and later made great profits 
thereby, as the major bear movement commencing 
in 1892 was at an end. 


EVENTS SINCE 1860 


185 


1897 

Distinct improvement characterized this year. 
New railroad construction increased to 2,161 miles 
and the production of pig-iron amounted to 9,600,- 
000 tons. Bank clearings increased to $57,000,- 
000,000 and failures decreased in number from 
1.31% of all the firms in business to 1.26%. Immi¬ 
gration amounted to 230,832. 

Monetary matters were more sound. The for¬ 
eign trade increased to $1,842,000,000; and the 
excess of exports to $357,000,000. Gold exports 
again exceeded imports but only to the small 
amount of $253,000. Surplus reserves in the New 
York banks averaged the high figure of $38,500,- 
000. Commodity prices in this country rose as 
shown by Bradstreet’s index figure of $6.12. 

The stock market was more active, but the ten 
stocks continued much the same range of fluctua¬ 
tions they had passed through in the last three 
years. Domestic money rates returned to the 4% 
of 1895, and railroad earnings continued to im¬ 
prove. Crops, too, remained strong. Though 
corn showed a decrease, wheat increased to 530,- 
000,000 bushels and cotton increased to 11,000,000 
bales. The three sold respectively at $.319, $.954 
and $.07. When the Dingley Tariff Act had 
brought an end to anxiety in that field, it was dis¬ 
covered that the country was well on the road to 
prosperity. 

1898 

Everywhere prosperity reigned. New construc¬ 
tion amounted to 3,199 miles, while iron produc- 


186 


BUSINESS BAROMETERS 


tion increased to 11,700,000 tons selling at $9.46. 
Bank clearings jumped up to $68,827,000,000; 
failures decreased to 12,000 in number; and 230,000 
immigrants entered the country. 

In monetary affairs, the volume of foreign trade 
still showed an increase due to the great increase 
in exports in spite of the fact that imports had 
somewhat declined. Exports which had amounted 
to only $824,000,000 in 1895 had increased steadily 
with the improving crops until in this year they 
amounted to $1,255,000,000 or rather 'more than 
two-thirds of the total volume. Imports of gold 
increased correspondingly to the immense figure of 
$120,391,674. Surplus reserves showed a decline 
from the abnormally high figures of the preceding 
year. American commodity prices continued to 
rise as indicated by Bradstreet’s index figure of 
$6.57. 

The New York Stock Exchange reported trans¬ 
actions amounting to 113,000,000 shares, and new 
securities listed amounting to $1,228,000,000 of 
which $700,000,000 were bonds. The ten stocks 
rose from a low point of 115 to a high point of 127 
in June. Net railroad earnings jumped up to 
$2,111 per mile. Once more money rates were nor¬ 
mal, time loans in New York averaging 4i%. The 
crops, too, kept pace with the advancing pros¬ 
perity, for cotton amounted to 11,200,000 bales, 
corn to 1,900,000,000 bushels, and wheat to 675,- 
000,000 bushels. Although the Spanish War tem¬ 
porarily disarranged business, it was so short that 
it acted in the end as a great stimulus to trade. 


EVENTS SINCE I860- 


187 


1899 

Conditions, already prosperous, continued to 
improve throughout this year. New mileage 
amounted to 4,592 miles; iron production ad¬ 
vanced to 13,600,000 tons. Bank clearings showed 
a phenomenal growth to $94,000,000,000, while 
failures decreased to 9,337 in number or only .81 of 
1% of all the firms in business. The number of 
immigrants increased to 311,715. 

Monetary conditions showed a similar strength. 
The volume of foreign trade amounted to more 
than $2,000,000,000 and the balance sheets showed 
an excess of exports amounting to $476,000,000. 
Money rates at home and abroad were 4%, and the 
‘excess of importation of gold amounted to only 
$6,000,000. Commodity prices in this country and 
in England showed an increase as indicated by 
Bradstreet’s index figure of $7.21 and the Econo¬ 
mist’s figure of 1,972. 

On the New York Stock Exchange, transactions 
increased to 176,000,000 shares, while the listing of 
new securities amounted again to nearly $1,230,- 
000,000. The ten stocks continued their rise from 
126 to 144. Net railroad earnings increased to 
$2,272 per mile. Though the cotton and wheat 
crops showed a decline, corn increased so that the 
total bushels of corn and wheat together again 
amounted to more than 2,600,000,000 in number. 
Industry in all lines was again firmly on its feet. 
In reaction against the cut-throat competition 
which had existed all through the depression just 
ended, and had thoroughly exasperated business 


188 


BUSINESS BAROMETERS 


interests, a great movement towards consolidation 
in industries and towards “ integrating trusts ” 
began in earnest with this burst of expansion. In 
fact, this year saw the beginning of many of our 
largest trusts and monopolies in their present form 
of organization. 


1900 

With the opening of this year, over-expansion was 
in full swing. To be sure some of the figures in the 
fundamental subjects showed a slight decline as 
compared with those of 1899, but this was rather 
a hopeful sign than otherwise for the prospects of 
the continuation of good times. Thus new railway 
construction declined to 4,157 miles while pig-iron’ 
production remained high at 13,789,000 tons selling 
at $17 a ton. Bank clearings, too, declined to 
$86,000,000,000, but this was still more than $15,- 
000,000,000 greater than the clearings of two years, 
before. Failures numbered 10,774 with liabilities 
of $138,495,000. Immigration increased to 448,570 
in number. 

While the total volume of trade advanced to 
$2,300,000,000, the balance “ in favor of ” this 
country reached to $648,800,000, the largest bal¬ 
ance of this kind in the history of the country. 
Imports of gold exceeded exports by $12,600,000. 
Bank reserves were normal. In commodity prices, 
Bradstreet’s figure rose to $7.88 and the Econo¬ 
mist’s to 2,178. 

The stock market continued active in transac¬ 
tions but a smaller amount of new securities were 


EVENTS SINCE 1860 


189 


listed. Though suffering the usual spring slump of 
this period, the ten stocks rose from a low point of 
132 to a high point of 155. Net railroad earnings 
advanced to $2,519 per mile. Domestic money 
rates strengthened to 5% on time loans. Crops 
were again firm both in yield and in price. Corn 
and wheat together amounted to 2,627,000,000 
bushels and sold respectively at $.80 and $.45 per 
bushel. The reelection of McKinley and the en¬ 
actment of the “ Gold Standard ” bill gave addi¬ 
tional impetus to business. Everywhere consoli¬ 
dation was the rule, especially in the railroads, 
where “ community of interests ” was becoming 
common. 


1901X 

Prosperity was running riot. New construction 
increased to 4,912 miles, while iron production ad¬ 
vanced to 15,878,000 tons selling at $14. Bank 
clearings bounded up to $118,410,000,000 and 
failures remained about the same as in 1900. 
Immigrants increased somewhat to 487,900. 

A slight increase came in the total volume of 
foreign trade, but the excess of exports decreased 
somewhat. The latter fact was due to an increase 
in imports, and the excess of gold exports which 
came in this year amounted to $3,000,000. Bank 
reserves were still about normal, though tending to 
decline. Commodity prices both in this country 
and in England declined as indicated by the respec¬ 
tive index figures of $7.57 and 2,014. 

The activity of the stock market was extreme. 


190 


BUSINESS BAROMETERS 


On the New York Exchange more than 266,000,000 
shares were traded, and more than $2,565,000,000 
of new securities were issued, of which the majority 
were stocks. This was the year when a partial 
panic in the market was caused by the Northern 
Pacific stock corner, and most stocks suffered from 
artificial manipulation. The ten stocks, which we 
have used heretofore, rose from 154 to 172 between 
January and November, 1900, but more active 
stocks continued the sharp advance begun in 1900, 
to May of 1901. Net railroad earnings continued 
their increase to $2,668 per mile. To be sure the 
corn crop decreased somewhat, but the wheat crop 
increased from 500,000,000 to 748,000,000 bushels. 


1902 

This was a year when the average business man 
and manufacturer were very optimistic; when the 
daily papers were prophesying still higher prices 
and still greater activity, and when the surface 
conditions were apparently more satisfactory than 
ever before. If had it not been for gigantic 
crops, a severe depression would probably have set 
in at once. In mercantile conditions, new railroad 
construction amounted to 5,076 miles while iron 
production increased to 17,800,000 tons, selling at 
the advanced price of $20 a ton. Bank clearings 
remained at about $118,000,000,000 while failures 
remained abnormally low at 11,615 in number or 
only .93 of 1% of all the firms in business. Immi¬ 
gration increased to 648,743. 


EVENTS SINCE 1860 


191 


Monetary conditions showed a slight decrease in 
the total volume of trade; also a decrease to 
$391,000,000 in the balance of exports, due, again, 
entirely to an increase in imports. Gold imports 
exceeded exports by $8,000,000. Bank reserves 
were abnormally low, those of the New York banks 
averaging only $10,700,000. American commodity 
prices showed a distinct gain indicated by Brad- 
street’s index figure of $7.87, but English prices 
were falling. 

The New York Stock Market, though not so 
active as in 1901, still reported transactions 
amounting to 188,000,000 shares, and new securi¬ 
ties listed amounting to $1,317,000,000. Thus in 
two years new securities had amounted to almost 
$4,000,000,000. Men who recognized the meaning 
of this tremendous increase in new securities issued, 
knew that a day of reckoning must come soon. 
Meanwhile, the ten stocks continued to rise from 
170 to 190, but fell again to about 170 in December. 
Net railroad earnings continued to increase to 
$2,830 per mile. A slightly decreased wheat crop 
was reinforced by an increase in corn amounting to 
1,000,000,000 bushels, so that the total crop of 
wheat and corn amounted to more than 3,150,000,- 
000 bushels. Cotton production increased 2,000,- 
000 bales over the previous year. But even these 
excellent figures could not save the unsound condi¬ 
tions of the money and stock markets. Further¬ 
more, confidence was unsettled by severe anti-trust 
agitation and certain government prosecutions of 
trusts. These facts, together with a study of the 


192 


BUSINESS BAROMETERS 


Babsonchart, clearly warned students of the situa¬ 
tion that the area of over-expansion was again 
consumed, and another depression was again 
imminent, although it was generally believed that 
this “ area ” represented only a minor movement, 
and that the major movement, beginning in 1897, 
was still upward. 

1903 

Shaken confidence and unstable stock market 
conditions resulted in the so-called “ Undigested 
Securities Panic ” of this year, in which few figures 
of fundamental subjects were radically altered ex¬ 
cept those directly related to the stock market. 
Thus new railroad construction advanced to 4,675 
miles, and the production of pig-iron to 18,000,000 
tons. Bank clearings declined to $109,000,000,000. 
Failures increased in number to 12,069 or .94 of 
1% of all the firms in business. Immigration ad¬ 
vanced to 857,000. 

In monetary matters the volume of foreign trade 
advanced to $2,480,000,000 and the balance “ in 
favor of ” this country amounted to $489,000,000. 
Excess of gold imports increased to $20,900,000. 
Bank reserves increased somewhat. American 
prices remained strong at $7.94 and English prices 
strengthened. 

On the New York Stock Exchange, transactions 
declined to 161,000,000 shares, but the issue of new 
securities continued to be large at $1,008,000,000. 
In the past six years more than $8,000,000,000 of 
new securities had been turned loose on the market. 


EVENTS SINCE 1860 


193 


The ten stocks fell during the year from 180 to 
146. Net railroad earnings per mile continued 
their steady increase to $2,887. Crops declined to 
no great extent from those of 1902. In justice to 
those statisticians who found no signs forecasting a 
depression in this year, it must be said that these 
figures were not extremely unsatisfactory. In fact, 
had it not been for the very great increase in 
securities, there probably would have been no de¬ 
pression of 1903. However, owing to the stock 
market troubles, labor troubles, and certain other 
conditions, this year was one of depression. 

1904 

That the panic of 1903, like that of 1890, was not 
fundamental in its effects is pretty clearly shown by 
the fact that expansion, not depression, followed 
immediately in 1904. New railroad construction 
continued to increase to 5,003 miles, though iron 
production declined to 16,497,000 tons selling at 
$12.73 a ton. Total bank clearings also increased 
to $112,600,000,000; and failures increased slightly 
in actual numbers, and also in percentage of firms 
in business to .92 of 1%. Immigration almost held 
its own at 812,870. 

Monetary matters showed firm banking condi¬ 
tions. The volume of foreign trade again increased 
and owing to a marked increase in imports and a 
slight decrease in exports, the balance “ in favor of ” 
this country decreased to $415,000,000. Once 
more gold exports exceeded imports, in this year, by 
$36,000,000. The average surplus reserve of the 


194 


BUSINESS BAROMETERS 


New York banks rose from $12,000,000 to $28,000,- 
000. Commodity prices remained much the same 
as in 1903. 

The stock market was again active, though the 
issue of new securities on the New York Exchange 
declined to $710,900,000 of which more than $500,- 
000,000 was bonds. The forty stocks* rose again 
after their sharp decline in 1903. Net railroad 
earnings increased to $2,989 per mile. Time loan 
rates dropped to 5% in this country and 3i% 
abroad. In crops, cotton amounted tp the largest 
yield on record of 13,451,000 bales, selling at $.117 
per lb.; corn amounted to 2,467,000,000 bushels, 
selling at $.594 per bushel; and wheat amounted to 
552,000,000 bushels, selling at $1.11 per bushel. In 
this year, Roosevelt’s administration was continued 
by his election to the office of Presidency, and the 
attention of the whole world was attracted to the 
Russo-Japanese War. 


1905 

Boom times continued in increasing and un¬ 
paralleled measure. New railroad construction 
amounted to 5,050 miles, and pig-iron production 
jumped to 22,990,000 tons selling at $15.57 a ton. 
Bank clearings advanced to $143,800,000,000 while 
failures declined in number to 11,520. Immigra¬ 
tion increased greatly to 1,026,000 persons. 

Both volume of foreign trade and excess of ex¬ 
ports, showed an advance, and $3,498,000 were 

* Beginning 1904, the forty stocks (twenty rails and twenty industrial) 
have been used in place of the ten stocks previously mentioned. 


EVENTS SINCE 1860 


195 


imported in excess of gold exports. The average 
surplus reserve of the New York banks declined to 
only $10,200,000. The American index figure of 
commodity prices advanced to $8.09. 

The stock market was very active. On the New 
York Exchange, transactions amounted to 263,- 
000,000 shares, and new securities listed amounted 
to a billion and a half dollars, of which nearly a 
billion were in bonds. The forty stocks in this 
year had an unprecedented rise from 82 to 100. 
Net railroad earnings advanced to $3,135 per mile. 
Though the cotton crop declined 3,000,000 bales, 
the wheat and corn crops were both larger than in 
1904, amounting together to more than 3,400,000,- 
000 bushels. Though surface conditions appeared 
wonderfully prosperous, confidence was badly 
shaken by the Life Insurance and Traction Com¬ 
pany exposures of this year. 

1906 

Business continued on an .inflated basis. New 
construction in this year amounted to 5,643 miles, 
and iron production advanced to 25,000,000 tons 
selling at $16.70. Bank clearings were at the sec¬ 
ond high point on record, increasing to $160,000,- 
000,000, while failures declined in number to only 
10,682 or .77 of 1% of all the firms in business. 
Immigration amounted to 1,100,000. 

The volume of foreign trade amounted to $3,- 
118,000,000. The balance “in favor of ” this 
country increased to $477,000,000; while the ex¬ 
cess of gold imports, aided by artificial importation, 


196 


BUSINESS BAROMETERS 


amounted to $109,000,000. The average surplus 
reserve of the New York banks dropped to only 
$7,300,000. Commodity prices advanced as shown 
by the American index figure of $8.42. 

On the stock exchange, transactions increased, 
and prices continued abnormally high. The forty 
conservative stocks dropped from the high of 114 in 
January to a low point of 100 in the winter. Rail¬ 
road net earnings advanced to $3,580 per mile. 
Crops were tremendous. Cotton yielded 13,000,- 
000 bales at $.115; corn yielded 2^927,000,000 
bushels at $.56; and wheat yielded 735,000,000 
bushels at $.865. Such satisfactory crop condi¬ 
tions, however, only served to increase the mad pace 
which prosperity had assumed, and students of 
conditions were not satisfied. Liquidation, there¬ 
fore, commenced, securities and merchandise were 
sold, and stocks of all classes declined in price. 
The money situation was especially strained, as the 
depression of 1903 was not severe enough to liqui¬ 
date many accounts which should have been cleared 
up. In fact, conditions were far from satisfactory 
at the end of the year. The San Francisco Earth¬ 
quake proved to be another factor which unsettled 
business. ' 

1907 

In this year prosperity, carried to an extreme 
point, collapsed in panic. But, as is usual, the 
change in conditions was not foreseen except by 
those students of fundamental statistics who clearly 
saw by means of a Babsonchart that the area of 


EVENTS SINCE 1860 


197 


over-expansion was about consumed, and that we 
had entered a period of liquidation which might 
not end for several years. New construction 
decreased to 5,499 miles, while iron production 
amounted to 25,000,000 tons selling at an average 
price of $23. Bank clearings, however, declined to 
$145,000,000,000, and failures increased in number 
to 11,725. Immigration advanced to 1,285,000. 

In monetary affairs, the total volume of foreign 
trade continued its increase to the unparalleled 
figure of $3,346,000,000; the balance from excess of 
exports increased to $500,256,000; and in gold 
movements the excess of imports declined to $88,- 
000,000. The bank reserves were everywhere 
extremely low, those in New York averaging under 
$400,000. This together with high commodity 
prices, as illustrated by Bradstreet’s index figure 
of $8.90, showed money conditions to be highly 
unsatisfactory. 

The stock market, always a sensitive barometer 
of all changes, declined decidedly from the begin¬ 
ning of the panic in March. On the New York Ex¬ 
change, transactions amounted to only 196,000,000 
shares, and new securities, to only $997,000,000. 
The forty stocks which had temporarily recovered 
from their severe decline in 1906, dropped again 
from a high point of 111 in December, 1906, to a 
low point of 60. Railroad net earnings continued 
their increase to the high point of $3,699 per mile, 
held up by crops and the volume of trade. Crops 
declined somewhat from the bumper crop of 1906, 
but were still excellent. Wheat and corn together 


198 


BUSINESS BAROMETERS 


amounted to more than 3,200,000,000 bushels and 
sold at $.963 and $.64 respectively. Domestic 
rates on time loans advanced to 6i%, while rates 
abroad advanced to 4i%. Legislation adverse to 
trusts and railroads added to the general consterna¬ 
tion in business circles, and before the end of the 
year, the country had dropped from over-active 
prosperity into dull depression. 


1908 

Depression had, in this year, extended from the 
stock market to other lines of business. New 
building was at a very low ebb. Although 3,654 
miles of new railroad were constructed, only 15,- 
900,000 tons of pig-iron were produced, and there 
was little new building. Pig-iron sold at about 
$15.54 per ton, Bank clearings declined to $132,- 
408,000,000 and failures increased in number to 
15,690. The lack of demand for labor is shown by 
the fact that only 782,870 immigrants entered the 
country, although wages still held up. 

As has been universally true in the past, such a 
period of depression is accompanied by low money 
rates. The surplus reserves held by the banks were 
very large throughout the entire year and the per¬ 
centage of cash was high. Not only were rates low 
in idle United States but also throughout Europe. 
The volume of foreign trade amount'ed to $2,869,- 
209,000 and the balance of trade “ in favor of ” 
the Uhited States aimouhted to $636,461,000, while 
gold movements showed an excess of exports 


EVENTS SINCE 1860 


199 


amounting to $30,939,163. The demand for money 
was still further lessened by a distinct decrease in 
commodity prices, the Brads'tVeet Index declining 
to $7.72 in June. 

The stock market remained almost as depressed 
as in 1907 both in transactions and new stocks 
listed, but by November the prices began to show a 
distinct rise. Thus the forty stocks, which had 
remained under 80 all during the spring, rose in 
December to 92. Railroad net earnings declined 
to $3,144 per mile. Fortunately, crops remained 
good. Cotton, yielding 13,086,000 bales, sold at 
$.106 per lb.; corn yielding 2,668,000,000 bushels 
sold at $.786; and wheat yielding 664,000,000 
bushels sold at $1.05. In politics a temporary 
currency bill was passed to meet the depressed 
conditions; while Mr. Taft’s election to the Presi¬ 
dency secured the continuation of the Republican 
administration and policy. The depression had 
passed the low point, giving place to marked im¬ 
provement. In fact, by the spring of the next 
year, the area of depression was completed. 


1909 

Though still suffering from the depressing busi¬ 
ness conditions following the panic of 1907, this 
was a year of apparent improvement. New rail¬ 
road construction decreased to more than 3,476 
miles, and the production of pig-iron showed a 
decided advance to 25,800,000 tons selling at $16.12. 
Bank clearings also advanced to $165,838,000,000, 


200 


BUSINESS BAROMETERS 


and failures decreased in number to 12,924. Immi¬ 
gration continued low at 751,786 new arrivals. 

In monetary affairs, money rates continued at a 
low level, as is usual in depressions following a 
panic. But the volume of foreign trade advanced 
to more than $3,000,000,000, due entirely to an 
increase in imports, while the excess of exports 
decreased to $252,677,000. Once more gold ex¬ 
portations exceeded imports, reaching in this year 
the high point of $88,793,000. Bank reserves 
declined from the high figures of 1908 to more 
norm'al figures. Bradstreet’s index figure of com¬ 
modity prices advanced to $8.51. 

The stock exchange was again thoroughly active. 
In New York, transactions amounted to more than 
214,000,000 shares, while new securities listed 
increased to $2,424,000,000, almost equally di¬ 
vided between stocks and bonds. The forty stocks 
rose from 86 to 105. Railroad earnings increased 
slightly in the gross, while the net was $3,912 per 
mile as a result of economies introduced during the 
depression. Though crop reports in the early part 
of the year were unsatisfactory, the final figures 
showed a decline only in cotton, while wheat and 
corn were good. Cotton yielded more than 10,- 
000,000 bales selling at $.126 per lb.; corn yielded 
2,772,000,000 bushels selling at $.767 a bushel; 
and wheat reached the high point of 737,000,000 
bushels selling at $1.26 per bushel. These figures 
signify that the country enjoyed a temporary im¬ 
provement, as would be expected after the condi¬ 
tions of 1907 and 1908. 


EVENTS SINCE 1860 


201 


1910 

During the first few months of this year mer¬ 
cantile conditions forged ahead in a fashion that 
bade fair to precipitate a premature period of forced 
liquidation. Only the slowing up of business, as 
general conditions became increasingly unsound, 
saved the situation. Iron production, which aver¬ 
aged 2,500,000 tons for the first four months of 
the year, averaged only 2,100,000 tons for the 
remaining months, while the price fell from $16.12 
to $15.16 before the end of the year. Bank clear¬ 
ings declined slightly to about $164,095,000,000, 
and liabilities in failures increased by an average 
of $4,000,000 a month over those of 1909. The 
number of immigrants increased to over 1,000,000. 

The fundamental figures in monetary conditions 
showed most clearly the unsound condition of the 
country, which could not have withstood the strain 
of a continued advance in mercantile affairs. Thus, 
money rates were forced up from their low level of 
1909, marking a strained money market fully a 
month earlier than the usual rise due to crop move¬ 
ments. The loans of the New York Clearing 
House banks averaged per month more than the 
deposits for the twelve months of the year. These 
facts, together with a yearly figure for Bradstreet’s 
index of commodity prices amounting to about 
$9.00, showed clearly that the country’s money 
market was strained and unsound. 

Investment conditions reflected this unsatisfac¬ 
tory state of affairs most faithfully. Transactions 
on the New York Exchange declined to less than 


202 


BUSINESS BAROMETERS 


165,000,000 shares, the lowest figure since 1903; 
but new securities listed, amounted to $2,047,664,- 
045, a considerable amount of which was due to 
the abolishment of the unlisted section of the Ex¬ 
change. The forty stocks dropped from 104 to 83. 
Although gross earnings of the railroads showed 
an increase over the year before, the unfavorable 
increase in the ratio of operating expenses caused 
net earnings to show a marked and most unsatis¬ 
factory decline. Optimism based on the crop re¬ 
ports was well justified by the actual returns. 
Wheat production declined somewhat, but cotton 
was better, and corn yielded a bumper crop of 
more than 2,800,000,000 bushels. The prices of 
all three, however, declined respectively to $1.12 
a bushel, $.151 a pound and $.66 a bushel. Un¬ 
certainty was the keynote of the year. “ Insur¬ 
gency/’ Democratic success at the polls, and 
governmental delay in trust and railroad rate 
questions, had their share in causing hesitation. 

1911 

Mercantile conditions became less favorable. 
Total bank clearings declined slightly. Under con¬ 
ditions of normal growth along the X-Y Line, 
clearings for the country, excluding New York, 
should have been increased greatly instead of re¬ 
maining so nearly on a level. There was a larger 
number of failures, and liabilities were about 5% 
lighter. A marked decline of more than 15% was 
shown in immigration reports. Average per mile 
earnings of the railroads reporting to the Interstate 


EVENTS SINCE 1860 


203 


Commerce Commission declined. Commodity 
prices declined, and this slackening was followed 
by an advance in food-stuffs, which checked the 
decline of Bradstreet’s index of commodity prices. 

Money rates were much easier, but students of 
fundamental conditions did not feel that the loans 
of the banks had been sufficiently liquidated to 
render the situation satisfactory. In January and 
March the National Banks reported a percentage 
of loans to deposits, with the exception of the call 
of September 1, 1910, higher than at any time since 
1908. The net deposits also increased, the figure 
$6,689,018,000 on June 7, being the highest on 
record, with the per cent of reserve at 22.10% 
compared with a previous high of 23.94% in 1908. 
Imports declined, and exports of general merchan¬ 
dise increased about 12%. 

Investment conditions during 1911 were very 
unsatisfactory. Dullness was at times exceedingly 
marked. On the New York Stock Exchange the 
number of shares traded was very small, 127,- 
207,258, compared with 164,051,061 in 1910. 
Bond sales increased, and fewer new securities 
were listed, but the amount of actual issues was 
nearly 15% greater. Gold production continued 
to increase. A severe drought reduced the yield in 
some of the crops; wheat, oats, hay, and potatoes 
were below the average; corn was only fair, while 
the largest acreage of cotton ever known produced 
over 15,000,000 bales. Investment conditions were 
adversely affected by the Supreme Court decisions 
nnd reorganization of large corporations under the 


204 


BUSINESS BAROMETERS 


Sherman Law, the consequent discussion and un¬ 
certainty reacting unfavorably on the market and 
business in general. 


1912 

With the exception of the activity attendant 
upon the good crops, business remained for the 
most part below the line of normal growth. Fail¬ 
ures numbered even more than in the preceding 
year. Bank clearings, although responding in the 
late fall to the crop influence, remained nearly at a 
level for the first three quarters of the year. Com¬ 
modity prices advanced sharply throughout the 
year. Pig-iron production increased to more than 
29,000,000 tons. Railroad earnings as reported to 
the Interstate Commerce Commission showed a 
gain; both gross and net earnings of the roads 
increased. Only 838,172 immigrants came to 
his country, 5% less than in 1911. 

Money rates were high. Circulation increased. 
Surplus reserves of the New York clearing house 
banks (excluding the trust companies) reported at 
$44,000,000 in February, was reduced in July to 
a deficit of more than $200,000. Imports gained 
about 19% for the year, giving the largest total in 
the history of the trade. The balance in favor of 
the United States was $581,144,938 compared with 
a previous high of $636,461,360 in 1908. Gold ex¬ 
ports gained about 27% over 1911, with gold 
imports remaining about the same, thus resulting 
in a rather less favorable balance. 

Investment conditions were not satisfactory. 


EVENTS SINCE 1860 


205 


Prices of forty representative stocks fluctuated 
from a winter low of 89 to a high of 100 in August. 
Bond sales fell off and prices were lower than in 
any recent year since 1908. The crops were large, 
but cotton made a small showing as compared with 
the big crop of 1911. Tariff discussion, corporation 
investigation, and other unsettling influences, dis¬ 
turbed the market and business in general. Labor 
troubles were particularly in evidence and exerted 
a most adverse effect. Students of fundamental 
conditions saw in Mr. Wilson’s election the fulfill¬ 
ment of the great law, that whenever there is deep 
social and economic unrest and dissatisfaction, the 
people seek a new administration in hope of relief. 

1913 

The decline in business which started in 1911 
continued this year. Over-expanded conditions 
were temporarily bolstered up by bumper crops in 
1912, but in 1913 the decline was rather hastened 
by unusual events, notably the Ohio flood in March 
and the financial strain caused by the Balkan War, 
which ended during the year. Failures again in¬ 
creased in number from 15,452 to 16,037, and in 
liabilities from $203,117,391 to $272,672,288. The 
average liabilities per failure were somewhat 
greater. Commodity prices declined throughout 
the year, indicating that the turning point had 
been reached in 1912. Pig iron production during 
the first of the year was the heaviest in history, 
but after the first few months declined rapidly. 

Monetary stringency and contraction of credit 


206 


BUSINESS BAROMETERS 


were characteristic throughout the entire year. 
Rates for prime commercial paper averaged over 
and rates of the banks of England, France 
and Germany averaged nearly 5%, the highest 
since 1875 and probably for many years before 
that. Much of the strain was caused by the finan¬ 
cing of the Balkan War, which ended during the 
year. If foreign monetary affairs had not been so 
serious, the heavy balance of exports would have 
been favorable. As it was, Europe settled the 
balance by returning United States * securities. 
Two direct results of the monetary strihgency were, 
a steady contraction in business, and the speedy 
enactment of a new currency law. 

Security prices declined steadily from the first 
of the year, and on June 11 broke sharply in a near 
panic. The forty stocks which averaged 94 in 
January, dropped to 76, and the twenty bonds fell 
from 96 to 91. The summer market picked up 
considerably, but another drop occurred in Decem¬ 
ber, when many issues sold lower than in June. 
New issues fell from $2,253,587,300 in 1912 to $1,- 
645,736,200, and fewer corporations were char¬ 
tered than in any year since 1908. The copper 
stock market held up remarkably well, considering 
depression in other lines, due to heavy European 
demand for copper in preparation for war. Poli¬ 
tics caused uncertainty throughout the entire year 
because of important legislation pending and active 
anti-trust investigation. During the last three 
months the tariff and income tax law (on October 
3) and the new currency law (on December 23) 


EVENTS SINCE 1860 


207 


were passed. Crops were about average; winter 
wheat was a bumper crop, but corn did only fairly 
well. To students of fundamental conditions, it 
was evident that a year of depression lay ahead. 

1914 

By far the greatest event in this year was the 
beginning of the European War. The decline of 
1913 quickly developed into depression. Several 
enormous failures occurred in June and July, in¬ 
cluding the Claflin catastrophe. This liquidation, 
however, seemed to clear the air. There were 
many indications that an improvement in business 
would come with the bountiful fall harvests. Such 
was the situation when on August 1 the European 
War burst upon the world, bringing panic to finan¬ 
cial circles, the closing of exchanges, and stagnation 
to business. As business was well liquidated, no 
serious national catastrophe occurred, and matters 
soon began to adjust themselves to the new situa¬ 
tion. 

The total barometer figures for the year tell of 
severe depression, though they do not show the 
stagnation which occurred during the latter half 
of the year. Bank clearings for the whole country 
fell to $155,000,000,000 from $169,800,000,000 in 
the previous year. Liabilities of failures touched 
nearly $360,000,000, the heaviest mortality for 
twenty-two years, involving over 1% of the total 
number of firms in business. Immigration, how¬ 
ever, was the heaviest since the year of 1907. The 
commodity price index, which had been declining 


208 


BUSINESS BAROMETERS 


in sympathy with general business, shot up to 
$9.8495 when war was declared, by far the highest 
point in history, but prices soon fell off again when 
it was realized that imports from Europe would 
be resumed. Pig iron production dropped to 
23,000,000 tons, new building was very quiet, and 
railroad construction fell to 1,532 miles, the lowest 
in half a century. Railroad earnings were some¬ 
what smaller than in 1913. 

Monetary conditions during the first half of the 
year were distinctly easy. Commercial paper rates 
ruled below 4%, with surplus reserves of the New 
York Banks (excluding trust companies) as high as 
$40,000,000. The declaration of war in a moment 
transformed this comfortable position into a dan¬ 
gerous crisis. Enormous shipments of gold bullion 
and coin were made from New York to the Bank of 
England, but sterling exchange soared to $5.10. 
The heavy surplus in the New York Banks was 
soon displaced by a deficit of about $30,000,000. 
Money rates rose to the nominal figure of 8%, but 
funds could hardly be obtained at any price. Clear¬ 
ing house certificates amounting to $124,695,000 
were issued in New York, and over $360,000,000 of 
emergency currency was taken out, raising the per 
capita circulation ,to $37.31. In Europe a general 
moratorium of debts was established. Enormous 
grain exports soon built up a favorable trade bal¬ 
ance, thus stopping gold exports, and the inaugura¬ 
tion of the Federal Reserve system on November 
16 restored the monetary situation to compara¬ 
tive ease. 


EVENTS SINCE 1860 


209 


When all of the stock exchanges throughout the 
rest of the world closed, an avalanche of selling was 
turned upon the New York market. On July 30 
the forty stocks dropped to 71 and the twenty bonds 
to 91. The New York Exchange closed, and the 
other United States exchanges quickly followed 
suit, reopening December 12. Some trading was 
carried on in outside markets, where prices were 
considerably below the closing prices of the New 
York Exchange. When the exchanges were finally 
opened, severe restrictions si,nd minimum prices 
were imposed to prevent another flood of European 
selling, but stocks for the most part averaged above 
the closing prices of July 30. The twenty bonds, 
however, sold down to 88. The crops, especially 
winter wheat, were excellent, and because of “ war 
prices ” for grains were the most valuable ever 
grown. Wheat sold up to $1.68 a bushel. Cotton, 
however, was forced down to 6 cents a pound. 
When the war broke out anti-trust agitation by 
the government was dropped and the eastern rail¬ 
roads were allowed to increase freight rates. With 
these factors added to the sound fundamental con¬ 
dition of business, close students of the situation 
looked for a substantial improvement during the 
coming year. 


1915 

The year 1915 was one of phenomenal expansion, 
demonstrating in a most forcible way the applica¬ 
tion of the law of equal reaction to business condi¬ 
tions. It opened with business in the depth of 


210 


BUSINESS BAROMETERS 


depression, and ended in the midst of great expan¬ 
sion. The solid foundation laid in the depression 
of 1914 was the real basis of this tremendous ex¬ 
pansion. War orders and continued huge grain 
shipments gave the first impetus to business. 
Gradually domestic trade began to revive, and 
finally, when the success of tremendous crops was 
assured, the boom in business broke all bounds. 
Although the total yearly figures show only to a 
limited extent the tremendous activity attained by 
business during the latter part of the .year, they 
present a wonderful record. Clearings for the year 
increased to $188,000,000,000 compared with 
$155,000,000,000 the previous year. Failure lia¬ 
bilities dropped from $358,000,000 in 1914 to $300,- 
000,000, the number of small failures considerably 
increasing, as is usual at the close of a period of 
depression. Gross railroad earnings amounted to 
$863,000,000 compared with $837,000,000 in 1914. 
Commodity prices moved rapidly upward. Brad- 
street’s index in December was 10.6473. The 
iron and steel industry experienced the greatest 
revival in its history. Pig iron production for the 
year amounted to 29,900,000 tons compared with 
23,300,000 tons in 1914, while unfilled tonnage of 
the United States Steel Corporation nearly doubled 
during the year. 

Monetary conditions throughout the year were 
extremely easy, in spite of enormous business 
activity. Commercial paper rates, even during the 
fall months, dropped to 3%, while surplus reserves 
of the New York Clearing House Banks (excluding 


EVENTS SINCE 1860 


211 


trust companies) swelled to over $200,000,000, 
figured under the new reserve requirements. This 
unprecedented ease in money was due principally 
to the enormous importation of gold from Europe. 
Huge exports of merchandise from the United 
States to the belligerents had completely reversed 
the international balance of 1914, and forced Euro¬ 
pean exchange rates to unheard-of low levels. 
Sterling exchange, which touched $5.10 in 1914, 
dropped to $4.50, and exchange of the other be- 
ligerent countries suffered even greater deprecia¬ 
tion. In order to make further purchases in the 
United States, the European nations therefore 
shipped more than $400,000,000 in gold to this 
country. The effect of such a great increase in our 
money supply was immediately evident. Circu¬ 
lation per capita at once increased and by the end 
of the year had swelled from $34.55 to $38.48, 
while the banks, especially in New York, suddenly 
found themselves with more money than they 
could profitably employ. 

The advance which took place in certain stock 
prices was one of the most spectacular in history. 
Early in the year it became evident that a number 
of companies were going to be greatly benefited 
by war orders. Bethlehem Steel, among the first 
of the “ war stocks,” in a few months’ time jumped 
from about 46 to 600. Suddenly, late in the spring, 
the whole stock market began to boil, for funda¬ 
mental conditions were sound and a reaction from 
the preceding long period of low prices was due. 
The greatest activity occurred in the industrials, 


212 


BUSINESS BAROMETERS 


the rails being depressed by heavy foreign selling. 
The average of the forty stocks, which stood at 
about 72 at the first of the year, by December 
had risen to 102. A tremendous demand for funds 
was felt in the latter part of the year, largely for 
speculation in stocks. Bank loans expanded rap¬ 
idly, reaching their maximum for the year $3,257,- 
606,000 in December. Surplus reserves showed a 
marked decline. Bonds were heavy throughout 
the year, due to the war’s tremendous demand for 
fixed capital, although some strengthening in prices 
occurred during November and December. Grain 
prices were very high during the first of the year, 
wheat selling up to $1.80 per bushel. The 1915 
grain crops, however, sold considerably lower. 
Cotton advanced to over 12 cents per pound, due 
to increased demand. Wage advances were evi¬ 
dent in nearly every branch of industry and labor 
shared in the general prosperity to a greater extent 
than ever before. Domestic politics were more 
favorable to general business. 

1916 

Phenomenal expansion in United States business 
and finance continued throughout 1916. The 
Business Index advanced from about 75 to 124. 
Nearly every line of industry participated in the 
great boom and production increased far beyond 
all previous records. Bank clearings amounted to 
$262,000,000,000, a gain of more than 35% over 
1915. Failures numbered 16,748 compared with 
20,600 the year before, while liabilities fell off to 


EVENTS SINCE 1860 


213 


less than two-thirds of those in 1915. Gross rail¬ 
road earnings amounted to over $1,000,000,000 
compared with $860,000,000 in 1915. The Bab- 
son Index of Industrial Commodities jumped from 
125 to 172. Bradstreet’s index rose 25%. Pig 
iron production exceeded 39,000,000 tons, 8,000,000 
greater than any previous record year. 

Rates for short-time money continued easy until 
the last of the year, when a gradual strengthening 
took place. Net gold imports of $530,000,000 kept 
the banks in a fairly easy position, notwithstanding 
unprecedented loan expansion. In December call 
money rates at New York temporarily soared to 
15%. Resumption of gold imports, however, soon 
forced rates back again to low levels. The loan 
item of New York Clearing House Banks averaged 
$2,270,000,000 for the year, against $1,816,000,000 
in 1915. The balance of foreign trade in favor of 
the United States exceeded $3,000,000,000 and 
about six times the average balance in peace times. 
Sterling exchange was well supported by gold ship¬ 
ments and ruled about $4.75 throughout the year. 
Exchange on the other belligerents, however, sank 
to new low figures. 

The average stock prices experienced a smaller 
net gain than other economic subjects. This was 
due to the fact that the stock market at the begin¬ 
ning of 1916 had already well- discounted current 
business conditions. Prices declined during the 
summer. Early in the fall, however, when it be¬ 
came apparent that the war would last another 
winter, great advances were scored by certain in- 


214 


BUSINESS BAROMETERS 


dustrial stocks. United States Steel touched 
129%, Bethlehem Steel 700, Chino Copper 74%, 
Utah Copper 130, Central Leather 123, etc. The 
whole average of 40 stocks for a few weeks in No¬ 
vember and December held close to 110. Then 
came President Wilson’s first peace note to the 
belligerents, which precipitated a drop of about 
ten points in the sto‘ck averages. The year closed 
with the 40 stocks several points lower than when 
it began. 

Bonds gained slightly toward the last of the 
year, but the scarcity of funds for long time invest¬ 
ments prevented any extended advances. During 
the year a great wave of industrial expansion took 
place. More than 30,000 new corporations were 
formed, among which a host of wild-cat promo¬ 
tions were included. Crops, on the whole, were 
disappointing and were inadequate to meet the 
foreign and domestic demand. Wheat sold up as 
high as SI.90 a bushel while cotton touched 21 cents 
per pound. Unprecedented advances in wages 
were obtained by labor in nearly every line of 
business. 


1917 

The year 1917 was one of radical adjustment to a 
war basis. Soon after declaration of war, April 6th, 
the Government began the task of concentrating the 
country’s industrial power on lines essential to mil¬ 
itary needs. Business in such lines was extremely 
active; other branches of industry suffered from 
priority rulings which gave precedence to war busi- 


EVENTS SINCE 1860 


215 


ness in matters of transportation, raw materials, etc. 
In both the so-called “ essential ” and “ non-essen¬ 
tial ” lines, net profits were generally smaller than 
in 1916. This was due to drastic profits taxation 
and to price fixing. Taken as a whole, business 
conditions were not so good in 1917 as in 1916, 
although the total volume of both domestic and 
foreign trade continued very large. The Babson 
Index of Industrial Commodities advanced from 
181 on January 1, to 217 in July, but later dropped 
to 185. 

With the entrance of this country into the war in 
April, the flow of gold to the United States ceased, 
causing money rates to strengthen as the year ad¬ 
vanced. Bank loans expanded far beyond any pre¬ 
vious record. Loans of New York Clearing House 
Banks jumped 85% during the year. With the 
heavier demand for money, Federal Reserve Banks 
came into active operation. By December, 1917, 
the amount of Federal Reserve Notes had increased 
to $1,251,205,000, compared with $272,873,000 the 
first of the year. 

All prices of securities suffered a severe decline, 
which culminated in November. The number of 
shares traded dropped from 233,000,000 to 186,- 
000,000. The drop was the most abrupt since the 
panic of 1907. The bond market was monopolized 
by government issues, over one-half of the total 
transactions being in war loans. Railroads, in¬ 
dustrial and copper stocks sold at least 30% lower 
than in the previous year. The price of twenty 
high-grade bonds dropped from 94 to 80. 


216 


BUSINESS BAROMETERS 


Harvests were abundant, except in the case of 
wheat. This was a disappointment because of the 
needs of the Allies. The wheat crop was only a 
little larger than the small crop of 1916. Corn and 
oats, however, were the largest on record. Farmers 
received excellent prices and speculation in farm 
lands increased. 

1918 

On November 11, 1918, the Great War came to 
an end. After the surrender of Bulgaria on Sep¬ 
tember 30th, the break up of the Central Powers 
was amazingly rapid. The closing events of the 
war came in such quick succession that for the 
most part business was caught unprepared. Dur¬ 
ing November and December the majority of war 
orders were cancelled. The impetus, however, 
which general business had gathered during the 
war prevented a serious drop. 

From the time the armistice was signed to the 
close of the year industry simply “ marked time ”— 
awaiting developments. Cancellation of war con¬ 
tracts caused the temporary dislocation of many 
workers and some unemployment. Prices of most 
commodities began to decline, although not rapidly 
on the average. The Babson Index of Industrial 
Commodities declined from 220 July, 1918, to 189 
April, 1919. Bradstreet’s Index of 107 commodi¬ 
ties declined from 19.1624 to 17.2244. 

Statistically, 1918 was a year of highly stimu¬ 
lated business but profits were not as satisfactory 
as in 1916. Bank Clearings amounted to $332,353, 
977,000 or 8% more than in 1917, largely inflated 


EVENTS SINCE 1860 


217 


by the high prices of commodities. The volume of 
war business was tremendous, but production for 
civilian purposes was restrained to a minimum. 
Commercial failures were the lightest in years, an 
evidence of artificial stimulation and absence of 
competition. 

The 40 stocks which had been low because of 
heavy taxes and government restrictions began to 
discount peace at the surrender of Bulgaria, and 
by the time of Germany’s surrender had advanced 
about 7 points. Money which had been fixed at 
6% during the war, eased off to 5}^% when capital 
restrictions were removed, but money continued 
difficult to obtain and rates were firm for the re¬ 
mainder of the year. The 20 bonds moved upward 
about 6 points on peace news, but the rise was 
based more on sentiment than on immediate im¬ 
provement in financial conditions. 

Taken altogether 1918 should be counted as a 
prosperous year. Prosperity, however, was largely 
in paper profits. The actual volume of business 
transacted was not abnormally large, but price in¬ 
flation served to increase all business records giving 
a prosperous appearanc'e. Certain classes had 
gained greatly by the war but others, principally 
the soldiers, were poorer because of the war. Con¬ 
ditions therefore were not well balanced and busi¬ 
ness was not in a secure fundamental position. 

1919 

The year 1919 was one of sharp reaction from the 
restrictions imposed by the war. In the early part 


218 


BUSINESS BAROMETERS 


of the year commodity prices dropped and the 
forty stocks dropped to about 80. As the year 
progressed, however, a post-war boom took place. 
Speculation reached fever pitch. Stock traded on 
the New York exchange averaged more than a 
million shares a day. Industrial stocks rose from 
83 to 119, Rails from 85 to 90. New building, 
which had been confined almost entirely to indus¬ 
trial and war projects, during 1919 consisted of a 
fair volume of residential building. 

A wave of reckless extravagance swepLthe coun¬ 
try. Automobile factories had orders booked six 
months ahead. Bradstreet’s commodity price in¬ 
dex which had fallen to 17.2244 rose to 20.1756. 
Bank clearings averaged a 26% gain over the 
previous year. In May the campaign for the Vic¬ 
tory Liberty Loan was opened and about $5,250,- 
000,000 subscribed. 

In spite of the apparent great prosperity, under¬ 
lying conditions were becoming unsound. The 
banks found themselves in an over-extended posi¬ 
tion, with loans increasing steadily. With the 
ending of war-orders, overtime work at the factories 
ceased and the war bonus system was abandoned. 
Labor became restless and dissatisfied. Strikes 
occurred in almost every line of industry. In 
November the great steel strike took place involving 
over 365,000 men. It was evident at this time 
that although business was still showing a substan¬ 
tial increase over the previous year, expressed in 
dollars,, yet in actual volume there was a distinct 
slackening. Pig Iron production for 1919 showed 


EVENTS SINCE 1860 


219 


a loss of 20% U. S. Steel orders were 37% 
lighter. 

Earnings of industrial companies showed the 
first break in their four year upward climb. Net 
earnings in 1919 were 40% less than in 1918. 
Students of fundamental conditions realized that 
a storm was ahead and began to prepare for the 
reaction. 


1920 

In 1920 the unprecedented over-expansion and 
inflation which had extended over a period of five 
years, reached its peak and practically overnight 
broke and turned downward. During the first 
months business continued at high speed. Orders 
were booked far ahead and many manufacturers 
without knowledge of fundamental conditions, felt 
secure. However, large stocks of goods were piling 
up in this country and with the re-establishment of 
European factories, European demand slackened. 
Imports of goods began to increase heavily and by 
March and April were more than double those of 
the previous year. The inevitable working of the 
law of action and reaction took place, starting with 
a sudden break in commodity prices. 

Bradstreet’s Index, which was 20.8690 in Febru¬ 
ary by July had dropped to 19.3528 and in De¬ 
cember to 13.6263, showing a 35% decrease from 
the peak. The silk market was among the first to 
break, with a panic in Japan resulting in an im¬ 
mediate drop in raw silk in this country. Hides 
and wool both declined radically in the early part 


220 


BUSINESS BAROMETERS 


of the year. With the opening of the grain ex¬ 
change in July, wheat sold about $2.75 and corn 
$1.70 a bushel. From that time, however, the 
trend was gradually downward and by December 
wheat was selling on the exchange at about $1.70 
and corn at $.68. Factories stocked up with high 
priced material found themselves with goods worth 
only half as much, the market still declining and a 
slackening demand. 

Cancellation of contracts then swept the country. 
Manufacturers caught unprepared found them¬ 
selves in a very precarious situation. In anticipa¬ 
tion of the orders booked far ahead, their raw 
material stocks were heavy. The jobbers and re¬ 
tailers refused to take the goods ordered, finding 
they could not sell at a profit. Failures, which had 
been during 1919 the lowest in history, began to 
increase. Factories closed down, resulting in a 
widespread increase in unemployment. Although 
a large amount of building was planned, rapidly 
increasing costs curtailed actual construction. 

Money rates were very high all through the 
period. Commercial paper averaged 8% and call 
money, which had been as high as 20%, averaged 
about the same as commercial paper at the end of 
the year. Coincident with these high money rates, 
the twenty railroad bonds in May sold at an aver¬ 
age of 68.5 to yield about 6.7%. They later ex¬ 
perienced a rally in October but declined heavily 
again at the end of the year. The forty stocks 
reached their low in December, averaging about 
68.28. The Federal Reserve Banks, with loans 


EVENTS SINCE 1860 


221 


aggregating about $14,000,000,000, took a decided 
stand against further inflation, curbing speculation 
by increasing their discount rates. 

The Babsonchart experienced a drop of nearly 
100 points. It crossed the X-Y Line in August, 
and before the end of the year an increasing area of 
depression was under way. 


1921 

The year 1921 was one of depression. The re¬ 
adjustments which began in 1921 were continued 
at the rapid pace which began in 1920. The pre¬ 
cipitate fall in wholesale prices as measured by 
Bradstreet’s Index continued until by June they 
were 50% below the peak in 1920. 

Industrial production decreased rapidly and 
unemployment became general. Pig iron produc¬ 
tion which was running close to pre-war volume at 
the close of 1920 declined to the lowest level ex¬ 
perienced since the panic of 1917. 

Imports felt the decrease in foreign demand in 
1920, while exports did not fall off drastically until 
early 1921. This later situation had its greatest 
effect on the price of agricultural commodities; 
wheat, corn, oats and cotton falling to pre-war 
levels or below, while industrial prices in general 
only declined to a point 30%-40% above the 1913 
level. 

The heavy failures in evidence in the latter part 
of 1920 continued to grow in volume. Business 
profits measured by the returns of 100 industrial 


222 


BUSINESS BAROMETERS 


companies were almost $1,000,000,000 in 1920 and 
suddenly dropped to a figure below $100,000,000. 

As the banking situation strengthened, money 
rates became easier. Commercial paper which had 
been as high as 8% in the closing months of 1920 
dropped to 6% and the year closed with money at 
5%. In line with decreasing money rates, bond 
prices rose from 74 at the close of 1920 to 83 in 
December, 1921. Stock prices though recovering 
appreciably from the low of the previous year de¬ 
clined again in June and August. By the end of 
the year, a substantial recovery was under way. 

The Business Index showed very little gain from 
the low point of 1921 and the area of readjustment 
which began in 1920 was rapidly developed. 


1922 

The year 1922 was one of distinct improvement 
in business activity. The rise iu the Business In¬ 
dex from 95 to 150 indicated the rapid strides in 
business activity as a whole. 

The boom, however, was premature in that 
business had not become sufficiently readjusted to 
stand great expansion. Area G below the X-Y 
Line was only about half completed. Students of 
fundamental conditions realized then that the up¬ 
ward movement could be only short lived. 

In almost every line production was larger than 
in 1921. Building industries held first place — 
there was the largest amount of new building ever 
recorded in a single year. The total number of new 


EVENTS SINCE 1860 


223 


building projects of all kinds in the United States 
was estimated at 160,000 for 1922 compared with 
110,000 in 1921, and 80,000 in 1920. Inasmuch as 
fully 30 great industries were directly related to new 
building, that factor had a highly important part 
in the improvement in general business. 

Metal production increased. Pig iron output 
showed more than 55% gain over the preceding 
year. Copper output in the latter half of the year 
took a phenomenal spurt. In the crops, wheat and 
corn yields were good, standing about the same as 
those of 1921, while cotton production was 20% 
ahead. The Babson Production Index, covering 
19 principal commodities, gained about 40% over 
1921. Manufacturing was also ahead, as indicated 
by the fact that about 14% more workers were 
employed. 

Earning statements for 1922 were decidedly 
better than for 1921. A study of 100 leading com¬ 
panies showed that in 1921 52 companies lost 
money. Estimates based on partial reports for 
1922 indicate that the number of deficits were re¬ 
duced to about 25. For the most part profits were 
only moderate, but they were much better than in 

1921. 

The stock market reflected better earnings. 
Credit conditions showed distinct improvement. 
Whereas in 1921 the banks were tied up with a vast 
number of embarrassed concerns, very few locali¬ 
ties reported an unusual number of such cases in 

1922. Failures were heavy, but in liabilities they 
were 25% smaller than in the preceding year. A 


224 


BUSINESS BAROMETERS 


large number of small concerns were eliminated as 
is always the case toward the close of a period of 
severe liquidation. 

The condition of the banks was strong, borrow¬ 
ing only $705,000,000 from the Federal Reserve 
Banks. The year as a whole, however, was one of 
relatively easy money. 


HALF A CENTURY OF BUSINESS 

AS INDICATED BY 

BABSON’S BUSINESS BAROMETERS 


BANK CLEARINGS 


3-0 

&< 

<3J 


YEAR 

Railroad 
New Mi 

186C 

1,846 

1861 

651 

186. 

834 

186. 

1,050 

186-1 

738 

186* 

1,177 

186C 

1,716 

186' 

2,449 

1861 

2,979 

186* 

4,615 

187( 

6,070 

1871 

7,379 

187. 

5,878 

1872 

4,097 

1874 

2,117 

1875 

1,711 

187t 

2,712 

1877 

2,280 

1878 

2,629 

1879 

4,746 

1880 

6,876 

1881 

9,778 

1882 

11,599 

1883 

6,818 

1884 

3,973 

1885 

3,131 

1886 

8,128 

1887 

12,983 

1888 

7,066 

1889 

5,695 

1890 

5,656 

1891 

4,620 

1892 

4,584 

1893 

2,789 

1894 

2,264 

1895 

1,938 

1896 

2,067 

1897 

2,161 

1898 

3,199 

1899 

4,512 

1900 

4,157 

1901 

4,912 

1902 

5,076 

1903 

4,675 

1904 

5,003 

1905 

5,050 

1906 

5,643 

1907 

5,499 

1908 

3,654 

1909 

3,476 

1910 

3,918 

1911 

3,293 

1912 

2,997 

1913 

3,071 

1914 

1,532 

1915 

933 

1916 

1,098 

1917 

978 

1918 

721 

1919 

686 

1920 

314 


Total 

United 

States 


United 
States 
excluding 
New York 
City 


COMMERCIAL 
FAILURES 
R. G. DUN & CO. 


J3 

3 

02? 

32 

o 

CJ o 


g 3 
*■2 

h >- 
3 a 
on 

o 


Last three figures omitted No. Liabilities 

a$7,231,143 
5,915,742 
6,871,443 
14,867,597 
24,097,196 
26,032,384 
28,717,146 
28,675,159 
28,484,288 
37,407,028 
27,804,539 
29,300,986 
33,844,369 
35,461,052 
22,855,927 
25,061,237 
21,597,274 

23.289.243 

27,813,771 $7,955,100 

38,526,474 9,290,800 

49,989,848 11,375,400 

63,471,389 14,094,506 

60.878.243 13,962,287 

51,731,472 14,297,172 

44,199,985 13,214,113 

41,474,041 13,321,840 

49,293,721 15,616,891 

51,147,529 17,672,973 

49,541,635 18,441,607 

56,175,328 20,280,223 

60,829,090 23,370,482 

56,736,360 22,987,038 

62,011,107 25,348,638 

54,143.527 22,882,489 

45,460,059 21,072,252 

53,180,701 23,338,904 

51,246,324 22,375,549 

57,229.071 23,802,043 

68,826,557 26,854,775 

94,047,401 33,285,609 

86,070,550 33,436,348 

118,410,015 38,982,329 

118,023,299 41,695,109 

109,209,188 43,238,850 

112,559,013 43,909,594 

143,827,448 50,005,388 

159,905,718 55,229,889 

145,025,733 57,843,565 

132,408,849 53,132,969 

165,838,141 62,249,40a 

164,095,230 66,820,730 

160.229.774 67,856,961 

173,952,910 73,208,948 

169,815,701 75,181,419 

155,245,118 72,228,538 

187,817,564 77,253,172 

261.855.774 102,275,125 
306,944,716 129,539,761 
332,353,977 153,820.778 
417,784,895 181,982,220 
452,357,366) 209,222,353 
356,434,114)162,002,893 

324 e404,576,000Iel76,040,0001 


% per 
firms 
in bus. 


Population 

of 

Continental 
U.S. 
June 1 


IMMIGRA¬ 

TION 


Number of 
Arrivals 


•P 

b 

>* fl 
O 
d *a 


COMPTROLLERS’ REPORTS 
Condition of all Banks, June 30 each year 


oo QcJ 


a 

OJ 




° 6 2$ 

fi< 

- l 3 

CQ 


Individual 

Deposits 


Total Cash 
in Banks 


3,676 

$79,807,000 


31,443,000 

m 133,143 

$13.85 

% 

% 


6,993 

207,210,000 


32,064)000 

142,877 

13.98 


1,652 

23,049,000 


32,704)000 

72,183 

10.23 




495 

7,899,900 

0.0 

33,365,000 

132,925 

17.84 

No 

Report before 

520 

8,579,000 

AX 

34,046,000 

191,114 

19.67 




530 

17,625,000 

«Q 

34,748,000 

180,339 

20.57 

32.17 

68.06 

1,960 

1,505 

53,783,000 

.94 

35,469,000 

332,577 

18.99 

37.27 

68.79 

2,267 

2,780 

96,666,000 

1.33 

36,211,000 

303,104 

18.28 

39.38 

69.04 

2,279 

2,608 

63,694,000 

.94 

36,973,000 

138,840 

18.39 

41.70 

69.73 

2,293 

2,799 

75,054,000 

.79 

37,756,000 

352,768 

17.60 

43.94 

70.38 

2,354 

3,546 

88,242,000 

.83 

38,558,000 

387,203 

17.50 

47.61 

74.49 

2,457 

2,915 

85,252,000 

.61 

39,555,000 

321,350 

18.17 

45.61 

69.88 

2,796 

4,069 

121,056,000 

.77 

40,596)<iOO 

404,806 

18.27 

49.21 

73.57 

3,066 

5,183 

228,499,900 

.93 

41,677,000 

459,803 

18.09 

52.71 

78.83 

1,968 

5,830 

155,239,000 

.97 

42,796,000 

313,339 

18.13 

54.13 

79.15 

1,983 

7,740 

201,060,333 

1.21 

43,951,000 

227,498 

17.16 

54.55 

79.29 

3,336 

9,092 

191,117,786 

1.33 

45,137,000 

169,986 

16.12 

53.94 

79.62 

3,448 

8,872 

190,669,936 

1.36 

46,353,000 

141,857 

15.58 

53.68 

79.96 

3,384 

10,478 

234,383,132 

1.55 

47,598,000 

138,469 

15.32 

50.68 

78.78 

3,229 

6,658 

98,149,053 

.95 

48,866,000 

177,826 

16.75 

46.92 

79.04 

3,335 

4,735 

65,752,000 

.63 

50,156,000 

457,257 

19.41 

48.90 

73.39 

3,355 

5,582 

81,155,932 

.71 

51,316,000 

669,431 

21.71 

49.16 

75.02 

3,427 

6,738 

101,547,564 

.82 

52,495,000 

788,992 

22.37 

50.86 

76.88 

3,572 

9,184 

172,874,172 

1.06 

53,693,000 

603,322 

22.91 

53.08 

73.31 

3,835 

10,968 

226,343,427 

1.21 

54,911,000 

518,592 

22.65 

53.55 

77.96 

4,111 

10,637 

124,220,321 

1.16 

56,148,000 

395,346 

23.02 

51.33 

72.83 

4,350 

9,834 

114,644,119 

1.01 

57,404,000 

334,203 

21.78 

54.33 

77.13 

4,378 

9,634 

167,560,944 

.90 

58,680,000 

490,109 

22.45 

56.59 

75.80 

6,179 

10,679 

123,829,973 

1.02 

59,974,000 

546,889 

22.88 

57.78 

78.11 

6,647 

10,882 

148,784,337 

1.04 

61,289,000 

444,427 

22.52 

58.49 

77.21 

7,203 

10,907 

189,856,964 

.98 

62,948,000 

455,302 

22.82 

60.57 

78.83 

7,999 

12,273 

189,868,638 

1.07 

63,844,000 

560,319 

23.42 

60.44 

76.32 

8,641 

10,344 

114,044,167 

.88 

65,086,000 

623,084 

24.00 

59.85 

77.37 

9,338 

15,242 

346,779,889 

1.28 

66,349,000 

502,917 

24.03 

60.74 

79.56 

9,492 

13,885 

172,992,856 

1.25 

67,632,000 

314,467 

24.52 

56.03 

75.85 

9,509 

13,197 

173,196,060 

1.09 

68,934,000 

279,948 

23.20 

56.09 

76.66 

9,818 

15,088 

226,096,834 

1.31 

70,254,000 

343,267 

21.41 

56.28 

78.44 

9,469 

13,351 

154,332,071 

1.26 

71,592,000 

230,832 

22.87 

53.89 

76.04 

9,457 

12,186 

130,662,899 

1.10 

72,947,000 

229,299 

25.15 

54.04 

75.64 

9,485 

9,337 

90,879,889 

.81 

74,318,000 

311,715 

25.58 

52.27 

74.26 

9,732 

10,774 

138,495,673 

.92 

75,995,000 

448,572 

26.94 

52.45 

74.69 

10,382 

11,002 

113,092,376 

.90 

77,612,000 

487,918 

27.98 

52.00 

74.82 

11,406 

11,615 

117,476,769 

.93 

79,231,000 

648,743 

28.43 

53.80 

76.54 

12,424 

12,069 

155,444,185 

.94 

80,848,000 

857,046 

29.42 

54.11 

77.87 

13,684 

12,199 

144,202,311 

.92 

82,467,000 

812,870 

30.77 

52.52 

76.56 

14,850 

11,520 

102,676,172 

.85 

84,085,000 

1,026,499 

31.08 

53.36 

76.91 

16,410 

10,682 

119,201,515 

.77 

85,702,000 

1,100,735 

32.32 

54.52 

76.96 

17,905 

11,725 

197,385,225 

.82 

87,320,000 

1,285,349 

32.22 

54.79 

77.07 

19,746 

15,690 

222,315,684 

1.08 

88,939,000 

782,870 

34.72 

52.27 

76.00 

21,246 

12,924 

154,603,465 

.80 

90,556,000 

751,786 

34.93 

53.91 

75.78 

22,491 

12,652 

201,757,097 

.80 

92,149,000 

1,041,570 

34.33 

55.78 

76.82 

23,095 

13,441 

191,061,665 

.81 

93,564,000 

878,587 

34.20 

55.21 

76.59 

24,392 

15,452 

203,117,391 

.98 

94,979,000 

838,172 

34.34 

55.84 

77.29 

25,195 

16,037 

272,672,288 

.99 

96,394,000 

1,197,892 

34.65 

56.89 

77.92 

25,993 

18,280 

357,908,859 

1.10 

97,809,000 

1,218,480 

34.41 

56.89 

77.58 

26,765 

22,156 

302,286,148 

1.32 

99,224,000 

326,700 

35.72 

56.68 

77.84 

' 27,062 

16,993 

196,212,256 

.99 

100,639.000 

298.826 

39.34 

55.19 

76.37 

27,513 

13,855 

182,441,371 

.80 

102,054.000 

295,403 

45.66 

55.47 

77.15 

27,923 

9,982 

163,019,979 

.58 

103,468,000 

110,618 

51.40 

55.28 

79.35 

28,880 

6,451 

113.291,237 

.38 

104,883.000 

141,132 

54.51 

53.14 

79.02 

29,123 

8.881 

295,121,805 

.49 

106,298.000 

430,001 

57.34 

58.89 

80.55 

30,139 

19,652 

627,401.883 

1.02 

107,713,000 

805,228 

55.31 

58.25 

81.16 

30,812 

23,676 

623,896,251 

1.19 

109,130,000 

309,556' 

.* 

. 

. 

30,389 


.a~ 

CO oJ 

cJ 3 00 

r-1-s 

•S«Q 

s,° 


FOREIGN TRADE 


°c 

el 

i! 


n 


o'-g 

O 

<n 5 

ll 

Balance 

Trade 




BALANCE 
OF GOLD 
MOVE¬ 
MENTS 


MONEY 

RATES 


Com- 

mercial For- 
Paper eign 


COMMODITY PRICES 
(Average) 



as 


PC 

< 

w 

> 


1865 

$641,000,OOv 
815,800,000 
876,600,000 
968,600,000 
1,032,000,000 
1,051,300,000 
1,251,600,000 
1,353,800,000 
1,421,200,000 
1,526,500,000 
1,787,000,000 
1,778,600,000 
1,813,600,000 
1,717,400,000 
1,694,200,000 
1,951,600,000 
2,296,800,000 
2,460,100,000 
2,568,400,000 
2,566,400,000 
2,734,300,000 
2,812,000,000 
3,308,200,000 
3,422,700,000 
3,778,100,000 
4,062,500,000 
4,796,800,000 
4,664,900,000 
4,627,300,000 
4,651,200,000 
4,921,300,000 
4,945,100,000 
5,094,700,000 
5.688,200,000 
6,768,700,000 
7,238,900,000 
8,460,600,000 
9,104,700,000 
9,553,600,000 
10,000,500,000 
11,350,700,000 
12,215,800,000 
13,099,600,000 
12,784,511,169 
14,035,500,000 
15,283,400,000 
15,906,300,000 
17,024,067,607 
17,501,006,000 
18,517,732,000 
19,135,000,000 
22,773,714,000 
26,289,708,000 
27,808,472,000 
33.065.051.000 
37,683,563,000 
35.459.155,000 
37,194,318,000) 


$199,400,000 

231,900,000 

205,600,000 

200,700,000 

162,500,000 

187,700,000 

194,000,000 

177,600,000 

218,200,000 

252,200,000 

238,700,000 

226,400,000 

230,500,000 

214,600,000 

216,300,000 

285,500,000 

295,000,000 

287,100,000 

321,000,000 

321,200,000 

414,300,000 

375,500,000 

432,800,000 

446,100,000 

499,100,000 

478,300,000 

479,100,000 

568,400,000 

515,900,000 

688,900,000 

631,100,000 

531,800,000 

628,200,000 

687,800,000 

723,300,000 

749,900,000 

807,500,000 

848,100,000 

757,200,000 

990,600,000 

994,100,000 

1,016,400,000 

1,113,700,000 

1,368,300,000 

1,452,000,000 

1,423,800,000 

1,554,200,000 

1,572,953,479 

1,560,709,000 

1,639,219,1: 

1,457,700,01 

1,486,118,000 

1,502,502,076 


PC 

< 

n 

>< 

1860 

1861 
1862 

1863 

1864 

1865 

1866 

1867 

1868 

1869 

1870 

1871 

1872 

1873 

1874 

1875 

1876 

1877 

1878 

1879 

1880 
1881 
1882 

1883 

1884 

1885 

1886 

1887 

1888 

1889 

1890 

1891 

1892 

1893 

1894 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

1904 

1905 

1906 

1907 

1908 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

1921 

1922 

1923 


WORLD 
GOLD PRO¬ 
DUCTION 

Fine Ounces 




Transactions 
in Shares 
N. Y. Stock 
Exchange 


PRODUCTION OF COMMODITIES 


Wheat 

bushels 


Corn 

bushels 


Cotton 

bales 


Iron 

long tons 


p Copper 
lbs. 


RAILROAD 

EARNINGS 


Gross 


Net 


6,486,262 

5.949.582 

5.949.582 

5.949.582 
5,949,582 
5,949,582 
6,270,086 
6,270,086 
6,270,086 
6,270,086 
6,270,086 
5,591,014 
5,591,014 
4,653,675 
4,390,031 
4,716,563 
5,016,488 
5,512,196 
5,761,114 
5,262,174 
5,148,880 
4,983,742 
4,934,086 
4,614,588 
4,921,169 
5,245,572 
5,135,679 
5,116,861 
5,330,775 
5,973,790 
5,749,306 
6,320,194 
7,094,266 
7,618,811 
8,764,362 
9,615,190 
9,783,914 

11,420,068 

13,877,806 

14,837,775 

12,315,135 

12,625,527 

14,354,680 

15,852,620 

16,804,372 

18,396,451 

19.471,080 

19,977,260 

21,422,244 

21,965,111 

22,023,402 

22,352,095 

22,565,697 

22,265,198 

21,413,701 

22,752,229 

22,895,500 

20,491,176 

18,545,016 

17,663,736 

16,561,158 

el5,502,806 


53,813,937 

39,926,990 

49,832,960 

39,875,593 

72,765,762 

97,919,099 

114,511,248 

116,307,271 

97,049,909 

96,154,971 

92,538,947 

100,802,050 

84,914,616 

65,179,106 

72,014,600 

71,282,885 

69,031,689 

85,875,092 

80,977,839 

49,075,032 

66,583,232 

54,654,096 

77,324,172 

112,699,957 

176,421,135 

138,380,184 

265,944,659 

188,503,403 

161,102,101 

187,312,065 

263,081,156 

284,298,010 

196,438,824 

197,206,346 

214,632,194 

164,051,061 

127,207,258 

131,128,415 

83,470,693 

47,900,568 

173,145,203 

233,311,993 

185,628,948 

144,118.469 

316,787,725 

226.640,400 

172.712,716 

258,652,519 


173,104,924 

838,792,740 

3,849,469 

821,223 

16,128,000 

per mile 

1860 



4,500,000 

653,164 

16,800,00( 



1861 



1,600,000 

703,270 

20,160,000 

Not officially 

1862 

No Official Report 

450,000 

846,075 

19,040,00( 

published 

1863 



300,000 

1,014,282 

17,920,00( 

previous to 

1864 



2,269,316 

831,770 

19.040.00C 

1871 


1865 

151,999,906 

867,946,295 

1,750,000 

1,205,663 

19.936.00C 



1866 

212,441,400 

768,320,000 

2,340,000 

1,305,023 

22,400,000 



1867 

224,036,600 

906,527,000 

2,380,000 

1,431,250 

25,984.000 



1868 

260,146,900 

874.320,000 

3,012,000 

1,711.287 

28,000,000 



1869 

235.884,700 

1,094,255,000 

3,800,000 

1,665,179 

28,224,000 



1870 

230,722,400 

991,898,000 

2,553,000 

1,706,793 

29.120,000 

$9,040 

$3,177 

1871 

249,997,100 

1,092,719,000 

3,920,000 

2,548.713 

28,000,000 

8,116 

2,893 

1872 

281,254,700 

932,274,000 

3,683,000 

2,560,963 

34,720,000 

7,947 

2,775 

1873 

308,102,700 

850,148,500 

3,941,000 

2,401,262 

39,200,000 

7,513 

2,736 

1874 

292,136,000 

1,321,069,000 

5,123,000 

2,023,733 

40,320,000 

7,010 

2,585 

1875 

289,356,500 

1,283.827,500 

4,438,000 

1,868.961 

42,560,000 

6,764 

2,536 

1876 

364,194,147 

1,342,558,000 

4,370,000 

2,066,594 

47,040,000 

6,380 

2,307 

1877 

420,122,400 

1,388.218,750 

5,244,000 

2,301,215 

48,160,000 

6,207 

2,375 

1878 

448,756,630 

1,547,901,790 

5,755,000 

2,741,853 

51,520,000 

6,280 

2,610 

1879 

498,549,868 

1,717,434,543 

6,343,000 

3,835,191 

60,480.000 

7,190 

3,029 

1880 

383,280,090 

1,194,916,000 

5,456,000 

4,144,254 

71,680,000 

7,676 

2,928 

1881 

504,185,470 

1,617,025,100 

6,957,000 

4,623,323 

90,646,232 

7,337 

2,670 

1882 

421,086,160 

1,551,066,895 

5,701,000 

4,595,510 

115,526,053 

7,461 

2,702 

1883 

512,765,000 

1,795,528,432 

5,682,000 

4,097,868 

144,946,653 

6,663 

2,318 

1884 

357,112,000 

1,936,176,000 

6,575,000 

4,044,526 

165,875,483 

5,265 

2,185 

1885 

457,218,000 

1,665,441,000 

6,446,000 

5,683,329 

157,763,043 

6,570 

2,376 

1886 

456,329,000 

1,456,161,000 

7,020,000 

6,417,148 

181,477,331 

6,861 

2,444 

1887 

415,868,000 

1,987,790,000 

6,941,000 

6,489,738 

226,361,466 

6,540 

2,045 

1888 

490.560,000 

2,112,892,000 

7,473,000 

7,603,642 

226,775,962 

6,455 

2,063 

1889 

399,262,000 

1,489,970,000 

8,674,000 

9,202,703 

259,763,092 

6,822 

2,162 

1890 

611,780,000 

2,060,154,000 

9,018,000 

8,279,870 

284,121,764 

6,852 

2,136 

1891 

515,947,000 

1,628,464,000 

6,664,000 

9,157,000 

344,998,679 

6,986 

2,068 

1892 

396,131,725 

1,619,496,131 

7,493,000 

7,124,502 

329,354,398 

6,971 

2,069 

1893 

460,267,416 

1,212,770,062 

9,476,000 

6,657,888 

354,188,374 

6,058 

1,803 

1894 

467,102,947 

2,151,138,580 

7,161,000 

9.446,308 

380,613,404 

6,097 

1,804 

1895 

544,193,000 

2,503,484,000 

8,533,000 

8,623,127 

460,061,430 

6,223 

1,840 

1896 

610,254,000 

2,144,553,000 

10,398,000 

9,652,680 

494,078,274 

6,228 

1,884 

1897 

772,163,000 

2,261,119,000 

11,189,000 

11,773,934 

526,512,987 

6,771 

2,111 

1898 

636,051,000 

2,454,628,000 

9,345,000 

13,620,703 

568,666,921 

7,161 

2,272 

1899 

602,708,000 

2,505,148,000 

10,123,000 

13,789,242 

606,117,166 

7,826 

2,519 

1900 

788,638,000 

1,613,528,000 

9,510,000 

15,878,354 

602,072,519 

8,270 

2,668 

1901 

724,808,000 

2,619,499,000 

10,631,000 

17,821,307 

659,508,644 

8,696 

2,830 

1902 

663,923,000 

2,346,897,000 

9,851,000 

18,009,252 

698,044,517 

9,301 

2,887 

1903 

596,911,000 

2,528,662,000 

13,438,000 

16,497,033 

812,537,267 

9,248 

2,989 

1904 

726,819,000 

2,748,949,000 

10,575,000 

22,992,380 

888,784,267 

9,643 

3,135 

1905 

756,775,000 

2,897,662,000 

13,274,000 

25,307,191 

917,805,682 

10,631 

3,580 

1906 

637,981,000 

2,512,065,000 

11,107,000 

25,781,361 

868,996,491 

11,556 

3,699 

1907 

644,656,000 

2,544,957,000 

13,242,000 

15,936,018 

942,570,721 

10,543 

3,144 

1908 

700,434,000 

2,572,336,000 

10,005,000 

25,795,471 

1,092,951,624 

11,133 

3,912 

1909 

635,121,000 

2,886,260,000 

11,609,000 

27,303,567 

1,080,159,509 

11,897 

3,820 

1910 

621,338,000 

2,531,488,000 

15,693,000 

23,649,547 

1,097,232,749 

11,883 

3,746 

1911 

730,267,000 

3,124,746,000 

13,703,000 

29.726,937 

1,243,268,720 

12,641 

3,938 

1912 

763,380,000 

2,446,988,000 

14,156,000 

30,966,152 

1,224,484,098 

13,157 

3,738 

1913 

891,017,000 

2,672,804,000 

16,135,000 

23,332,244 

1,150,137,192 

12,308 

3,365 

1914 

,025,801,000 

2,994,793,000 

11,192,000 

29,916,213 

1,388,009,527 

12,754 

4,180 

1915 

636,318,000 

2,566,927,000 

11,450,000 

39.434,797 

1,927,850,548 

15,019 

5,178 

1916 

636,655,000 

3,065,233,000 

11.302,000 

38,621,216 

1,886,120,721 

17,246 

5,093 

1917 

921.438.000 

2.502.665.000 

12,041,000 

39,054,644 

1,908,533,595 

21.149 

3.915 

1918 

967,979,000 

2,811,302,000 

11,421,000 

31,015,364 

1,310,541,000 

22,049 

3,262 

1919 

833,027,000 

3,208,504,000 

13,440,000 

36,925,987 

1,209,061,040 

26,619 

1,763 

1920 

814,905,000 

3,068,569,000 

7,954,000 

16,668,126 

505,586,098 

23,671 

4,128 

1921 

867,598,000 

2,906,020,000 

9,762,000 

27,219,904 

950,285,947 

23,770 

4,916 

1922 

785,741,000 

3,054,395,000 

10,081,000 


. 



1923 


The figures, taken as they stand, rep¬ 
resent a measure of business and financial 
activity, by which the movements in business 
history can easily be traced. When inter¬ 
preted in accordance with the law of equal 
and opposite reaction they make a barometer 
of business by which the future trend of con- 
ditions is suggested. This application of the 
figures is clearly explained in the text-book 
“Business Barometers.’’ 


*—Imports in excess. 

a—Only New York clearings were reported regularly before I878J From 1878 onward, the totals are 
representative of the entire country. 

b—Sum does not include Imperial Russian States 4% duplicates $1,155,000,000. 

c—Excludes $425,000,000 Japanese Government Bonds. 

e—Estimated. 

m—Year ending June 30. 

p—Smelter Production from domestic ores. 

t—No. 1 Fdry., 1860-1875. No. 2- So. at Cinn. 1875 to date 








10 



2714 

$1.37 

$0.73 

$0,110 

$22.70 

$0,228 

1860 







8 



2751 

1.30 

.60 

.130 

20.26 

.222 

1861 


Figures 

not compiled before 1867 


8 



2878 

1.28 

.59} 

.312 

23.92 

.218 

1862 


(Last three figures omitted) 


8 



3492 

1.16 

.84 

.672 

35.24 

.338 

1863 







7 



3787 

2.01 

1.44} 

1.015 

59.22 

.470 

1864 

31.11 






7 



3575 

2.04 

1.26} 

.833 

46.08 

.392 

1865 

28.30 






7 



3564 

2.20 

.90 

.432 

46.84 

.342 

1866 

23.45 

$371,476 

$310,139 

$*61,337 

$681,615 

$46,525,234 

6 



3024 

3.33 

1.21 

.315 

44.08 

.253 

1867 

20.72 

368,006 

281,321 

*86,685 

649,328 

51,217,027 

6 



2582 

2.43 

1.23 

.248 

39.25 

.230 

1868 

15.74 

438,455 

337,375 

*101,079 

775,831 

17,990,352 

6 



2666 

1.50 

1.02} 

.290 

40.61 

.242 

1869 

17.85 

461,132 

403,586 

*57,546 

864,718 

42,673,184 

5} 



2689 

1.30 

1.02 

.239 

33.23 

.211 

1870 

15.50 

573,111 

460,352 

*112,759 

1,033,463 

39,074,027 

6 



2590 

1.60 

.77 

.169 

35.08 

.241 

1871 

13.12 

655,964 

468,837 

*187,126 

1,124,802 

57,524,835 

7 



2835 

1.62 

.70 

.221 

48.94 

.355 

1872 

15.35 

595,248 

567,757 

*27,490 

1,163,005 

4,958,864 

7 



2947 

1.76 

.63 

.201 

42.79 

.280 

1873 

16.52 

562,115 

569,872 

7,756 

1,131,988 

35,726,285 

6 



2891 

1.39 

.86 

.179 

30.19 

.220 

1874 

13.36 

503,162 

510,947 

7,784 

1,014,110 

39,075,158 

5} 



2778 

1.33 

.84 

.154 

25.53 

.226 

1875 

12.73 

427,347 

590,666 

163,319 

1,018,013 

7,555,448 

51 

3* 


2711 

1.35 

.62} 

.129 

20.75 

.210 

1876 

12.71 

480,440 

620,302 

139,856 

1,100,748 

7,352,983 

51 

31 


2715 

1.63 

.59} 

.118 

19.25 

.190 

1877 

12.50 

431,812 

737,092 

305,279 

1,168,904 

*1,821,911 

51 

3} 


2554 

1.24 

.53} 

.112 

17.05 

.165 

1878 

12.77 

513,602 

765,159 

251,557 

1,278,762 

*74,652,495 

5 

2} 


2225 

1.24 

.47 

.108 

22.82 

.186 

1879 

14.63 

696,807 

889,683 

192,876 

1,586,490 

*70,582,239 

5} 

3 


2577 

1.30 

.55 

.115 

29.86 

.214 

1880 

12.84 

670,209 

833,549 

163,339 

1,503,758 

*57,795,077 

51 

4 


2376 

1.30 

.62 

.120 

22.54 

.181 

1881 

11.65 

752,843 

767,981 

15,138 

1,520,825 

25,318,551 

51 

4 


2435 

1.32 

.77 

.115 

23.20 

.191 

1882 

12.50 

687,066 

795,209 

108,143 

1,482,275 

*16,007,191 

51 

31 


2343 

1.17 

.64 

.118 

19.62 

.165 

1883 

12.51 

629,261 

749,366 

120,104 

1,378,628 

12,990,589 

51 

31 


2195 

1.00 

.61} 

.109 

16.80 

.110 

1884 

15.15 

587,868 

688,249 

100,381 

1,276,118 

*12,228,104 

4 

31 


2023 

.94 

.51 

.104 

15.20 

.108 

1885 

13.00 

663,429 

713,404 

49,974 

1,376,833 

*26,613 

41 

31 


2023 

.88J 

.52} 

.092 

16.77 

.110 

1886 

13.09 

708,818 

715,301 

6,482 

1,424,119 

*35,758,901 

51 

31 


2087 

.88 

.48} 

.102 

20.05 

.138 

1887 

13.03 

725,411 

691,761 

*33,650 

1,417,172 

23,492,373 

5 

3 


2458 

.94 

.59} 

.100 

16.82 

.167 

1888 

13.21 

770,521 

727,106 

56,584 

1,597,628 

38,873,892 

41 

3 


2362 

.91 

.43} 

.106 

14.35 

.134 

1889 

11.77 

823,397 

857,502 

34,104 

1,680,900 

3,683,652 

6 

41 


2247 

.92 

.48} 

.110 

15.10 

.156 

1890 

11.41 

828,320 

970,509 

142,188 

1,798,830 

33,889,688 

51 

31 


2207 

1.05 

.67} 

.086 

13.78 

.127 

1891 

12.58 

840,930 

938,420 

97,489 

1,779,351 

58,380,272 

41 

3 

$7.7769 

2107 

.908 

.54 

.077 

12.74 

.115 

1892 

11.15 

776,249 

875,831 

99,582 

1,652,080 

6,703,151 

71 

3} 

7.5324 

2113 

.739 

.499 

.085 

11.42 

.107 

1893 

14.81 

676,312 

825,102 

148,789 

1,501,415 

80,499,128 

31 

21 

6.6846 

2002 

.611 

.509 

.069 

9.93 

.095 

1894 

12.82 

801,669 

824,860 

23,190 

1,626,529 

70,571,010 

4 

21 

6.4346 

1952 

.669 

.477 

.074 

10.86 

.105 

1895 

10.84 

681,579 

1,005,837 

324,257 

1,687,416 

*46,474,369 

6 

3 

5.9124 

1973 

.781 

.340 

.079 

10.29 

.109 

1896 

12.33 

742,595 

1,099,709 

357,113 

1,842,304 

253,589 

4 

3 

6.1159 

1917 

.954 

.319 

.070 

9.42 

.113 

1897 

12.09 

634,964 

1,255,546 

620,581 

1,890,510 

*141,968,998 

41 

31 

6.5713 

1902 

.952 

.376 

.059 

9.46 

.120 

1898 

10.69 

798,967 

1,275,467 

476,500 

2,074,435 

*5,955,553 

41 

31 

7.2100 

1972 

.794 

.413 

.068 

16.58 

.177 

1899 

10.36 

829,149 

1,477,946 

648,796 

2.307,095 

*12,614,461 

5 

4 

7.8839 

2178 

.804 

.453 

.092 

17.04 

.166 

1900 

9.54 

880,419 

1,465,375 

584,955 

2,345,795 

3,022,059 

41 

31 

7.5746 

2014 

.803 

.567 

.087 

13.61 

.161 

1901 

9.31 

969,316 

1,360,685 

391,369 

2,330,002 

*8,162,726 

51 

31 

7.8759 

1984 

.836 

.684 

.090 

20.00 

.116 

1902 

8.97 

995,494 

1,484,753 

489,258 

2,480,247 

*20,920,862 

51 

31 

7.9364 

2098 

.853 

.572 

.111 

17.08 

.132 

1903 

9.90 

1,035,909 

1,451,318 

415,409 

2,487,227 

36,408,593 

41 

3) 

7.9187 

2177 

1.04 

.507 

.124 

12.91 

.129 

1904 

8.76 

1,179,144 

1,626,990 

447,846 

2,806,135 

*3,498,938 

41 

31 

8.0987 

2175 

1.01 

.505 

.094 

15.79 

.157 

1905 

8.32 

1,320,501 

1,798,243 

477,741 

3,118,745 

*108,870,222 

51 

41 

8.4176 

2361 

.79 

.462 

.111 

16.37 

.192 

1906 

8.51 

1,423,169 

1,923,426 

500,256 

3,346,596 

*88,182,391 

61 

41 

8.9045 

2508 

.92 

.525 

.118 

23.12 

.199 

1907 

10.70 

1,116,374 

1,752,835 

636,461 

2,869,209 

30,939,163 

41 

3f 

8.0094 

2222 

.98 

.691 

.106 

15.60 

.134 

1908 

10.34 

1,475,520 

1,728,198 

252,677 

3,203,719 

88,793,855 

41 

31 

8.5153 

2231 

1.22 

.665 

.120 

16.18 

.131 

1909 

9.32 

1,562,904 

1,866,258 

303,354 

3,429,163 

*447,696 

51 

3i 

8.9881 

2407 

1.11 

.582 

.152 

15.24 

.129 

1910 

9.77 

1,532,359 

2,092,526 

560,167 

3,624,885 

*20,262,110 

41 

31 

8.7129 

2542 

.99 

.590 

.130 

13.68 

.126 

1911 

9.24 

1.818,073 

2,399,217 

581,144 

4,217,291 

*19,123,930 

41 

4 

9.1867 

2699 

1.05 

.685 

.115 

14.97 

.165 

1912 

8.92 

1,792,596 

2,484,018 

691,421 

4,276,614 

28,093,778 

51 

41 

9.2115 

2704 

.99 

.613 

.128 

14.98 

.155 

1913 

8.83 

1.789,276 

3,113,624 

324,348 

3,902,900 

165,228,415 

5 

Cl 

8.9985 

2644 

1.02 

.694 

.119 

13.30 

.131 

1914 

7.59 

1,778,596 

3,554,670 

1,776,074 

5,333,267 

*420,528,672 

3» 

* 

9.8530 

3238 

1.291 

.722 

.103 

13.65 

.175 

1915 

6.51 

2,391,635 

5,482,641 

3,091,005 

7,874,276 

*530,197,307 

31 

51 

11.8236 

4216 

1.38 

.817 

.144 

18.79 

.283 

1916 

5.58 

2,952,467 

6,233,513 

3,281,045 

9,185,980 

*180,570,490 

41 

5 

15.6385 

5418 

2.29 

1.663 

.235 

40.26 

.301 

1917 


3,031,212 

6,149,087 

3,117,875 

9,180,299 

*20,972,930 

6 

5 

18.7117 

6036 

2.20 

1.736 

.312 

36.30 

.245 

1918 


3,904,364 

7,920,425 

4.016,061 

11,936,846 

291,651,202 

51 

5 

18.6642 

6227 

2.23 

1.670 

.323 

32.23 

.189 

1919 


5.279.299 

8,228,424 

2,950,125 

13,507,723 

*94,977,065 


51 

18.8096 

7746 

2.32 

1.426 

343 

45.17 

.179 

1920 


2,509,147 

4,485,031 

1,975,883 

6,994,178 

*667,356.92C 

6} 

1 5 j 

11.3695 

5004 

1.46 

.576 

.151 

27.04 

.128 

1921 


3,112,747 

3,831,777 

719,030 

6,944,524 

*238,294,891 

51 

41 

12.1185 

4303 

1 235 

.630 

.211 

24.39 

.137 

1922 










































































































































In order to allow for further expansion 
of the yearly reviews, pages numbers 225 
to 228 inclusive have been omitted. 


225 



























CHAPTER VI 


SUBJECTS RELATING ESPECIALLY TO 
MERCANTILE CONDITIONS 


W HEN interpreting subjects from the Statis¬ 
tical Tables and Charts treated in this and 
the following two chapters, one must re¬ 
member that it is first necessary to decide in which 
of the four periods the country is: whether in a 
period of depression, a period of improvement, a 
period of over-expansion, or a period of decline. 
This is due to the fact that the same change in the 
figures of a given subject signifies different results 
under different periods; for example, during a 
period of depression an increase in Bank Clearings 
is a favorable sign, but during a period of over-ex¬ 
pansion a great increase is a dangerous sign. This 
problem, however, is readily solved by reference to 
the Babsonchart. 

After deciding in what period we are, each set of 
subjects must be interpreted in accordance with 
certain rules. In other words, with a given subject 
a decrease signifies one thing, an increase signifies 
another, while no change signifies a third. There¬ 
fore, the figures on each subject should be examined 
independently to ascertain whether the figures show 
a decrease, an increase, or no change. The new 
figure, whatever it is, will then be interpreted ac¬ 
cording as it shows “ more satisfactory conditions,” 
“ less satisfactory conditions,” or “ uncertainty.” 
After reaching this conclusion, relative to what the 


230 


BUSINESS BAROMETERS 


figures on the subject under consideration signify, 
a note should be made of the result. 

Each subject is treated in this manner and a 
conclusion reached. All of these conclusions are 
then summarized and count is taken of how many 
subjects signify an improvement, how many signify 
a decline and how many signify something else. 
All of these are then averaged, though a greater 
“ weight ” may be given to one subject than to an¬ 
other; and a conclusion reached as to the duration 
of the present period and the nature of'the next 
change. 

In short, the study of Fundamental Statistics 
consists simply of (1) obtaining the latest figures 
on each subject, noting their trend; (2) comparing 
both the figures and the trend with normal figures 
and normal trends for said subject; and (3) deduc¬ 
ing one final conclusion as to whether the figures 
and their general trend are becoming more or less 
normal, considering the areas of the Babsonchart 
and the Law of Equal Reaction. 

In this study, although theoretically the proper 
method is to consider each subject independently, 
yet the only safe method is to consider what they, 
as a whole, indicate. This can be best seen by a 
study of the Babsonchart. Therefore, although 
the directions given in these three chapters are very 
valuable for use as a check upon what the Babson¬ 
chart indicates, yet no independent subject should 
be allowed to overshadow what the Babsonchart 
indicates, viz.: the Babsonchart always shows at a 
glance in what minor period we are and what 


NEW BUILDING 


231 


period may next be expected; and gives an approxi¬ 
mate idea of how long it will probably be before 
this next period of depression or over-expansion 
will be upon us. 

Therefore, in all cases, the “ area consumed,” as 
shown by the Babsonchart, must also be carefully 
considered. 

Let us now turn directly to a study of such sub¬ 
jects as relate especially to mercantile conditions. 

WEALTH, BUILDING AND REAL ESTATE 
OPERATIONS 

“ Wealth,” according to Theodore E. Burton, 
“ comprises all things which are alike useful, limited 
in supply, and transferable. All wealth is produced 
from or created by land, labor or capital. Land 
includes every form of nature in earth, seas or air, 
together with the natural forces which may be set 
at work. It is the source of our so-called ‘ raw ma¬ 
terials.’ Labor includes physical strength and 
exertion, and the mental qualities which furnish 
them with method and ingenuity. 

“ Capital, technically defined, is wealth withheld 
from immediate consumption for the purpose of 
producing wealth in the future. It includes food, 
clothing and fuel for support of those engaged in 
production of wealth, necessary seed for planting, 
raw materials for the finished products of manu¬ 
factures or, if we look at the subject from the 
standpoint of the employer or capitalist, money for 
wages and the purchase of supplies. These may 
be included in the term ‘ circulating capital.’ There 


232 


BUSINESS BAROMETERS 


is also fixed capital, which includes tools, machines, 
factories, buildings occupied or used by those en¬ 
gaged in productive employment, improvements 
upon land, likewise ships and railways with all their 
equipment. Nations are rich or poor not in pro¬ 
portion to the amount of land or natural resources 
which they have, but in accordance as they have an 
abundance or lack of capital.” 

The above describes what is technically known as 
“ wealth.” A concrete example of what constitutes 
wealth may be found in the following tables. The 
figures are made up by the Bureau of the Census, 
Washington, and as reported for the census years, 
are carefully compiled records of actual values as 
appraised under the general terms, real and personal 
property. The figures for all years between the 
census years are estimates, and show proportional 
changes based somewhat upon partial returns in 
some of the items included. The tables show ex¬ 
actly the forms of wealth comprising the total 
$187,739,071,090, according to the estimate of 1912. 


ESTIMATED WEALTH OF THE UNITED 
STATES 


Real property taxed. 

Real property exempt .... 

Live stock. 

Farm implements and ma¬ 
chinery . 

Gold and silver coin and 

bullion. 

Manufacturing machinery, 

tools, etc. 

Railroads and their equip¬ 
ments . 


1904 1912 

$ 55 , 510 , 228,057 $ 98 , 362 , 813,569 
6 , 831 , 244,570 12 , 313 , 519,502 

4 , 073 , 791,736 6 , 238 , 388,985 

844 , 989,863 1 , 368 , 224,548 

1 , 998 , 603,303 2 , 616 , 642,734 

3 , 297 , 754,180 6 , 091 , 451,274 

11 , 244 , 752,000 16 , 148 , 532,502 








NEW BUILDING 


233 


1904 1912 

(a) Street railway, etc. . .. $4,840,546,909 $10,265,207,321 

(b) All other property.... 18,462,281,792 34,334,290,655 

Grand total. 107,104,211,917 187,739,071,090 


a. Street railways, etc. (itemized) 


Street railways. $2,219,966,000 

Telegraph systems. 227,400,000 

Telephone systems. 585,840,000 

Pullman and private cars . 123,000,000 

Shipping and canals. 846,489,804 

Privately owned water 

works. 275,000,000 

Privately owned electric 
light and power stations. 562,851,105 

Total. 4,840,546,909 

b. All other property, (itemized) 

Agricultural products. 1,899,379,652 

Manufacturing products .. 7,409,291,668 

Imported merchandise.... 495,543,685 

Mining products. 408,066,787 

Clothing and personal orna¬ 
ments . 2,500,000,000 

Furniture, carriages, etc.. . 5,750,000,000 

Total. 18,462,281,792 


$4,596,563,292 

223,252,516 

1,081,433,227 

123,362,701 

1,491,117,193 

290,000,000 

2,098,613,122 

9,904,342,051 

5,240,019,651 

14,693,861,489 

826,632,467 

815,552,233 

4,295,008,593 

8,463,216,222 

34,334,290,655 


Though the census figures are the only statistics 
which give the actual value of property in the 
country, since a complete statement is made only 
once in ten years, the needs of fundamental statis¬ 
tics lead to the adoption of certain other reports 
which may be expected to serve as barometers of 
the conditions termed wealth by our first propo¬ 
sition. 

Building statistics, including railroad and mu¬ 
nicipal construction, give us the most interesting 
figures on this subject. Because a new house costs 
$10,000, all land on the same street improves and 
the valuation of the whole city is some thousands 
of dollars greater at the next census. A factory 
erected on the same street might reduce the real 













234 


BUSINESS BAROMETERS 


estate value as residence property, but might so 
benefit the city as a whole as to greatly increase its 
entire wealth. 

The difficulty of obtaining accurate reports of 
building has been an obstacle heretofore in the way 
of systematic study of the subject. The laws of 
cities and states are so different, that the returns 
from building permits alone are not reliable as a 
basis. But from the field of the contractor another 
set of figures is to be had. The best of these have 
been developed by the F. W. Dodge Co., of New 
York. The business of such firms is to make a 
thorough canvass of the principal fields of construc¬ 
tion activity in order to furnish accurate informa¬ 
tion of business openings for contractors and 
supply firms of all kinds. Reports gathered by 
this very thorough system have been published 
from time to time for many years; but have only 
recently been segregated and tabulated. These 
reports cover the new work, both in private and 
municipal building and railroad construction. 
The values given are conservative and the result 
of careful inquiry by trained observers. 

Fire losses, as reported monthly, include all fires, 
and show the total destruction of timber, rolling 
stock of railroads, wharfage and shipping, as well as 
buildings of all kinds. As in the case of construc¬ 
tion or building statistics, the amounts given in 
these fire loss tables cannot be compared directly 
with the census figures on wealth. ^Sometimes the 
insurance loss is given, sometimes the assessed val¬ 
uation, sometimes an estimate, as in buildings and 


NEW BUILDING 


235 


contents under appraisal. The direct loss by forest 
fires is hard to determine exactly, while the indirect 
losses, so well known to the students of forestry, 
cannot be calculated for use at frequent intervals. 
The monthly record which is obtainable, however, 
is a valuable indicator of conditions likely to con¬ 
tribute to the improvement or decline of business 
and should, for that reason, be watched. Condi¬ 
tions of poverty following fires, or general improve¬ 
ment as a result of new construction, are both 
necessary and valuable barometers of business and 
show where to increase or decrease investment in 
land, labor and capital. 

Another factor of importance, and bearing a 
relation to the second group of subjects we are 
considering, is the real estate business. To under¬ 
stand rightly the financial condition of this country, 
we should know the history of real estate booms 
and watch for increased rents either of land or 
buildings. During the hard times of the winter 
following the crisis of 1907, many of the leading 
manufacturers reduced their rents fifty per cent, 
some more and some less. By such means, they 
hoped to keep their employees on hand for renewed 
production. Such action was an attempt to meet 
the wage-earner half way and is directly opposed to 
the spirit of that real estate boom, the chief phase of 
which is an arbitrary raising of rents for tenements 
of all kinds. Such raises are usually seen in times 
of improvement and especially towards the culmi¬ 
nation of a period of expansion when rising wage- 
scales attract the attention of the house owner who 


236 


BUSINESS BAROMETERS 


raises his rents, and reaps his harvest, at the same 
time when commodity prices and security markets 
are rising. A study of the statistics will show that 
real estate values are very good business barome¬ 
ters. New land developed, irrigation systems in¬ 
troduced, and a variety of similar factors may 
seem to be the causes of booms here and there; but 
none of these enterprises can be carried on without 
the active investment of capital under sound funda¬ 
mental conditions. 

So, for the purposes of fundamental statistics, 
beside the official figures on wealth, there should be 
included these three subjects: (1) new building, 
(2) fire losses and (3) real estate values. These 
subjects give us a gauge of conditions more fre¬ 
quently than once in ten years. 

As the business man is much more interested in 
the relation of wealth to prosperity than in any 
definitions, it is interesting to note history and 
ascertain how the wealth of the country has affected 
conditions in the past. Let us, for example, study 
the relation of “ Miles of New Railroad ” to general 
conditions, using these construction figures as 
illustrative of “ New Building.”* The first great 
crisis which this country experienced was in 1837; 
it was preceded by six years of great activity. The 
railroad mileage of the country had grown from 
23 miles in 1830 to 1500 miles in 1837. Simultane¬ 
ously with this growth in railroad mileage, new 
towns had been founded, new factories had been 


* This is done because it has been impossible to obtain good records 
strictly for “New Building ” previous to 1902. 


NEW BUILDING 


237 


opened, desert lands had become taxable, farm 
property and the wealth of the country had rapidly 
increased. If the reader will turn to the records 
of this time, he will find that there was a greater 
increase of wealth between 1832 and 1837 than 
during any previous ten years of our history. A 
great number and variety of new enterprises were 
started, the bank deposits were large and there was 
great interest in trading, shipping, manufacturing 
and real estate. In fact, this great increase in real 
estate speculation resulted in a similar increase in 
the assessed valuation of both city and country 
property. 

The second great crisis came in 1857, and was 
likewise preceded by a period of great increase 
in new construction. Immediately following the 
panic in 1837 there was a period of great depression 
and, although conditions improved in 1844 and 
1845, there was no great advance until the discovery 
of gold in 1849. By 1852, California was actually 
sending millions of dollars worth of gold to New 
York. Shipping received a tremendous impetus 
both on account of the trade with California and 
on account of the Crimean War in 1854 and 1855. 
There was also a great increase in railroad mileage, 
which advanced from only 5600 miles in 1847 to 
24,500 miles in 1857. In other words, in 1830 there 
were but 23 miles of railroad and in 1837, the year 
of the panic, this had been increased to 1500 miles. 
During the ten years between 1837 and 1847, only 
about 4000 miles of new track were constructed, yet 
in the ten years from 1847 to 1857 about 20,000 


238 


BUSINESS BAROMETERS 


miles were constructed. When studying such fig¬ 
ures it appears very easy to have prophesied a 
panic for 1857. With the building of these 20,000 
miles, thousands of new towns were settled, millions 
of acres of hitherto untaxed land became taxable 
as farm land, and a vast number of manufacturing 
and other enterprises were started. The result 
was another great increase in wealth equalled only 
by the increase which preceded the panic of 1837. 
As a still further result, came the panic of 1857, 
causing bankruptcies, suicides, and widespread 
destitution. 

The third great crisis came in 1873. Like its 
predecessors, it had many causes among which, 
beyond a doubt, was the great increase in new 
building construction and new miles of railroad. 
The Civil War had been accompanied by great 
destruction of property and a consequent reduction 
in wealth. This was due partly to deterioration 
of values and the depreciation of the currency; but 
largely to the fact that the attention of the people 
had been turned away from productive industry. 
Ploughshares had been turned into swords with 
the accompanying decrease in production. When 
the Civil War was over, both the South and the 
North again gave their attention to agriculture, 
manufacturing and commerce, with the result of 
an unprecedented rebound. During the early six¬ 
ties, taxable property decreased; during the early 
seventies it rapidly increased. The gain in wealth 
between 1868 and 1873 was greater than it had 
ever been in the history of the country. 


NEW BUILDING 


239 


If later panics (that is, the panics of 1884, 1893, 
1903, and 1907) are studied, the same law will be 
found to hold true. Furthermore, by inverse 
reasoning from these same figures it will be found 
that years of over-expansion may likewise be antic¬ 
ipated. 

Another set of building statistics have recently 
become available through the efforts of F. W. 
Dodge Company. These are figures of contracts 
awarded for each of the eleven main classes of 
building, as follows: Business buildings; Educa¬ 
tional; Hospitals and Institutions; Industrial; 
Military and Naval; Public buildings; Public 
Works and Utilities; Religious and Memorial; 
Residential; Social and Recreational; Miscellane¬ 
ous. By studying these figures it is possible to 
judge what class of building is running above or 
below normal. 

The following are certain conclusions* relative to 
“ Building Operations.” 

1. During a Period of Business Depression. 

(a) An increase forecasts better conditions. 

(b) A decrease forecasts continued depression. 

(c) No change signifies conditions to be sta¬ 
tionary. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase forecasts a period of over¬ 
expansion. 

* Special Note: — In using the rules — as also is true in regard to the 
rules given subsequently under other subjects — one must compare the 
present both with the corresponding month of the preceding year and 
with the preceding month of the same year. 


240 


BUSINESS BAROMETERS 


(b) A decrease forecasts a set-back. 

(c) No change suggests caution. 

3. During a Period of Over-expansion. 

(a) A great increase suggests that over-expan¬ 
sion is nearing an end. 

(b) A decrease may tend to lengthen the period 
of over-expansion. 

(c) No change signifies conditions to be sta¬ 
tionary. 

4. During a Period of Decline Following a Period of 

Over-expansion. 

(a) An increase is indicative of further trouble. 

(b) A decrease is natural under these condi¬ 
tions. 

(c) No change suggests caution. 

BANK CLEARINGS AND CHECK TRANSACTIONS 
Bank clearings are divided into two main classes: 

(a) Total Bank Clearings and Check Trans¬ 
actions of the United States. 

(b) Bank Clearings and Check Transactions of 
the United States excluding New York City. 

In every large city, and many small ones having 
more than two banks, there is an institution known 
as a “ clearing house.” Each day at some given 
hour, the representatives of all the banks in the city 
or town meet at one of the banks to exchange checks 
drawn on one another and such a bank thus serves 
as a temporary “ clearing house.” To illustrate: 
If customers of the Gloucester National Bank de¬ 
posit during the day $20,000 in checks drawn on 
the Gloucester Safe Deposit and Trust Company 


BANK CLEARINGS 


241 


and customers of the Trust Company deposit checks 
to the amount of $15,000 drawn on the Gloucester 
National Bank, instead of the Gloucester National 
sending a messenger to collect the $20,000 from the 
Trust Company and the Trust Company sending a 
messenger to collect the $15,000 from the Glouces¬ 
ter National, representatives of both banks meet 
and exchange checks and the Trust Company gives 
the Gloucester National a check for $5,000 to bal¬ 
ance the account. This process of settlement is not 
of great importance in a city having only two or 
three banks, but the average importance increases 
rapidly as the number of banks increases. In large 
cities such as New York, Chicago, Philadelphia and 
Boston, the “ clearing house ” occupies a separate 
building and has regularly salaried employees.* 

Up to August 15, 1916, the clearing houses above 
mentioned conducted the entire clearing business pf 
the country. On that date, however, the Federal 
reserve’ banks assumed the functions of clearing 
houses and extended the existing clearing facilities 
to many outlying districts, which up to that time 
had not been served by the clearing houses. Under 
the new plan each of the twelve Federal reserve 
banks handles checks for all the banks in their 
respective districts which agree to remit to them 
at par. This includes checks on all national banks 
throughout the country, and checks on a large num- 

* For further particulars as to the details of clearings and the business 
of clearing houses refer to Jas. G. Cannon’s most complete book on the 
subject, entitled “ Clearing Houses,” and also to “ The Principles of Money 
and Banking ” by Conant. For a very simple and condensed statement, 
refer to pages 8(>-86, inclusive, of “ Money and Investments ” by Mont¬ 
gomery Rollins. The changes in the clearing system brought about by 
the Federal Reserve law should also be considered. 


242 


BUSINESS BAROMETERS 


ber of state banks and trust companies. Eventu¬ 
ally the Federal reserve banks expect to be able to 
collect checks on practically all the commercial 
banks throughout the country. Therefore, by 
taking the reports of the Federal reserve banks, 
together with those of the clearing house associa¬ 
tions, we have a much more comprehensive record 
of bank clearings than formerly. Of course some 
allowance must be made for this change when 
comparing current figures for bank clearings with 
those previous to August, 1916. 

As to-day, practically all payments are made by 
check and all business is carried on through the 
banks, the volume of money handled by the banks 
by check increases or decreases in constant ratio 
with the general volume of business of the country, 
provided that the prices of the commodities and securi¬ 
ties traded in, remain constant. Therefore, as the 
banks pass their business through the clearing 
houses, a report on bank clearings is a very good 
barometer of present business conditions. 

Some people make the mistake of assuming that 
by studying clearing house statistics solely one can 
easily forecast business conditions. A study of 
these statistics is an aid in forecasting conditions, 
both along lines above mentioned and in connection 
with Prof. Irving Fisher’s “ Equation of Ex¬ 
change ”*; but taken by themselves they are of 
little value. On the other hand, some critics do not 
care “ to know about present conditions, but de¬ 
sire only to forecast future conditions.” This 

* See Professor Fisher’s book “ The Purchasing Power of Money.” 


BANK CLEARINGS 


243 


point of view is also illogical, as a knowledge of 
present conditions is a necessary step toward fore¬ 
casting future conditions. 

Were it not for the systematic reports received on 
bank clearings, the Babsonchart would be much less 
valuable. By a study of these clearings, as they 
are reported each week, one is in immediate touch 
with existing conditions throughout the country 
and is also able to study the “ velocity of circula¬ 
tion,” which, as it increases, is a form of credit in¬ 
flation. In making use of these statistics two 
methods are used: 

1. The bank clearings are plotted for each week 
for a number of past years with a horizontal scale 
for weeks and a vertical scale of billions. With 
one-half inch to a week this makes a plot about 
thirty inches long. It is customary to have each 
year under the preceding year, a thing easily done, 
as each plot is of the same length, although the 
angle of fluctuations is not constant. This gives 
comparative plots for several complete years, 
directly under which appears a plot for the present 
year up to the receipt of the last report on bank 
clearings. This not only gives the merchant a 
bird’s-eye view of the situation for the present 
year, but also an idea of what may be expected at 
different periods during the year. During some 
periods of the year, poor figures on bank clearings 
are not, in reality, as unsatisfactory as if they had 
occurred at other seasons. The principal use of 
this plot, however, is to study the fluctuations of 
the last portion of the plotted line for the current 


244 


BUSINESS BAROMETERS 


year. In other words, the business man notes 
whether the variations of the last few months 
plotted for the current year is upward or downward, 
and also how said variations compare with similar 
months of previous years, or in other words, with 
normal figures. If the plots for these previous 
years can be combined into one plot for an assumed 
normal year for purposes of comparison, the work 
is greatly simplified. This may seem to be a simple 
method of procedure, but when fully comprehended 
and carefully studied, it will be found to furnish not 
only a bird’s-eye view of present conditions, but, in 
conjunction with a study of other subjects, the best 
possible idea of whether general business is becom¬ 
ing better, worse, or simply holding its own. 

2. The other plan is more mathematical and more 
readily operated. Instead of plotting the figures 
for a series of years, merchants simply tabulate the 
totals as follows: 

Bank Clearing of U. S. Bank Clearing of U. S. 


Excluding N. Y. City 


Year 

Total 

Year 

Total 

1883 

$51,731,495,000 

1883 

$14,299,194,801 

1884 

44,199,000,000 

1884 

13,214,136,635 

1885 

41,474,000,000 

1885 

13,329,553,274 

1886 

49,293,000,000 

1886 

15,613,431,439 

1887 

51,147,700,000 

1887 

17,676,148,967 

1888 

49,541,000,000 

1888 

18,447,472,681 

1889 

56,175,427,997 

1889 

20,280,223,092 

1890 

60,829,090,002 

1890 

23,370,482,393 

1891 

56,736,838,805 

1891 

22,987,539,593 


1892 

1893 

1894 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

1904 

1905 

1906 

1907 

1908 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

1921 

1922 


BANK CLEARINGS 


245 


Bank Clearings 
$62,011,984,539 
54,143,562,775 
45,460,235,075 
53,182,278,527 
51,246,931,439 
57,229,973,206 
68,931,197,724 
94,177,969,223 
86,005,688,683 
118,410,964,282 
118,023,298,740 
109,208,987,769 
112,559,012,711 
143,829,448,441 
159,905,265,739 
145,025,733,493 
132,408,849,136 
165,838,191,330 
164,095,229,989 
160,230,773,656 
173,952,914,911 
169,815,701,000 
155,245,115,000 
187,815,580,000 
261,855,775,000 
306,946,716,000 
332,353,977,000 
417,784,895,000 
452,357,366,000 
356,434,114,000 
404,576,065,000 


(Continued) 

1892 

$25,349,515,337 

1893 

22,848,525,045 

1894 

21,098,428,055 

1895 

23,306,684,638 

1896 

22,304,476,717 

1897 

23,894,945,735 

1898 

26,859,415,287 

1899 

33,286,297,332 

1900 

33,431,486,823 

1901 

39,952,278,440 

1902 

41,695,109,575 

1903 

43,238,849,809 

1904 

43,971,594,038 

1905 

50,087,388,239 

1906 

55,227,436,983 

1907 

57,893,565,112 

1908 

53,132,968,880 

1909 

62,249,402,999 

1910 

66,820,729,906 

1911 

67,856,959,831 

1912 

73,208,937,649 

1913 

75,181,420,000 

1914 

72,228,539,000 

1915 

77,253,170,000 

1916 

102,275,125,000 

1917 

129,539,762,000 

1918 

153,820,778,000 

1919 

181,982,280,000 

1920 

209,222,353,000 

1921 

162,002,893,000 

1922 

176,040,345,000 


246 


BUSINESS BAROMETERS 


Column 1 is for the bank clearings of the entire 
United States, and column 2 is for the United States 
with the exception of New York City. (In practice, 
these figures are subdivided into months and only 
the past eight or ten years are studied.) As a second 
step, the merchant notes from the monthly tables 
the actual figures received for the current year to 
date and estimates the probable clearings for the 
remainder of the year. This may be illustrated 
somewhat as follows: The merchant notes what 
proportion the clearings for January, February and 
March have heretofore borne to the clearings of the 
entire year. (A novice might think it was simply 
necessary to multiply the clearings of three months 
by four in order to have an estimate for the entire 
year, but such a method is not correct, since it does 
not provide for the seasonal changes before alluded 
to.) By making a study of the relation that these 
three months bear to the entire year for several 
years back, it is possible to make a very good esti¬ 
mate for the entire current year even if only three 
months are reported. Having made this estimate, 
one compares it with the total figures for previous 
years and forms an opinion as to the probable busi¬ 
ness conditions for the current year. If the study 
is dropped at this point, these figures would be of 
no value, but the merchant revises this estimate 
each month, as new figures are received, and also 
notices whether the revised figures are increasing or 
decreasing. In other words, by this second method, 
the one universally recommended, the merchant 
studies the statistics to note whether each sue- 


BANK CLEARINGS 


247 


ceeding estimate is an increase or a decrease over 
the previous estimate. If the new estimate is an 
increase, this shows that business conditions are 
improving as marked by an upward line on the plot. 
If the new estimate is a decrease, it shows that 
business is decreasing, as marked by a downward 
line on the plot. If the new estimate is practically 
the same as the last one, this indicates that there 
may be no change either for the better or for the 
worse, as marked by a horizontal line on the plot. 

The remaining point to be considered on the sub¬ 
ject of bank clearings is the reason for separating 
the subject into the two main classes as per the 
preceding tables. The reason for this subdivision 
is as follows: The clearings of New York alone are 
more than one-half of those of the entire country. 
If these clearings were simply a result of commer¬ 
cial business transactions, that is, the transactions 
of merchants, manufacturers and business men, 
there would be no reason why the New York clear¬ 
ings should not always be included with the 
clearings of other cities. The facts of the case, 
however, show that an exceedingly large percentage 
of New York clearings is affected by the transac¬ 
tions of bankers or is intimately related to the 
stock exchange transactions. This may be clearly 
shown by plotting two lines, one for the transac¬ 
tions of the New York Stock Exchange and the 
other for the bank clearings of New York. These 
lines, although very “ zig-zag,” are almost parallel 
to each other, and when one rises the other follows, 
and vice versa. For this reason, during dull times 


248 


BUSINESS BAROMETERS 


on the stock exchange, bank clearings of the United 
States including New York may show a decrease, 
even though general business throughout the coun¬ 
try is increasing, while during a very active period 
on the New York Stock Exchange, the bank clear¬ 
ings of the entire United States including New 
York, may show an increase, even though general 
business throughout the country is decreasing. 

For this reason, in order to judge correctly the 
general business of merchants and manufacturers 
throughout the country, it is best to consider the 
bank clearings of the United States excluding New 
York City. If the figures for the United States 
with the exception of New York City have been 
properly studied and a conclusion drawn, it is also 
well then to note the figures for the entire country, 
including New York City. If the figures for New 
York City confirm the conclusion arrived at when 
not including New York City, then the result may 
be considered absolutely correct. The most suc¬ 
cessful merchants tabulate, each month, the sum of 
the figures for New York and those excluding New 
York, after first multiplying the latter by 4 or 5, as 
suggested by Prof. Irving Fisher of Yale University. 

Note 1. There are two exceptions which may be 
taken to using bank clearings as an index. One 
is the fact that, as banks consolidate', the ratio is 
improperly changed. This is not true of check 
transactions. The other is that bank clearings are 
increased by the increased cost of commodities and 
securities, as well as by the increased volume of 
trade. 


BANK CLEARINGS 


249 


The other objection, that an increase in clearings 
does not necessarily mean an increase in the volume 
of business, is a valid criticism. It is, therefore, 
well to always note the change in the Commodity 
Price Index, which index shows how much allow¬ 
ance should be made when studying bank clear¬ 
ings. 

Moreover, as a check on one’s conclusion, it is 
well to note railroad tonnage and especially idle car 
figures, as the latter are wholly dependent upon the 
volume of business, and are independent of rates or 
prices. 

Note 2. It is pointed out also that clearings re¬ 
ported by one city may be reported also by another 
city. For example, the business of a branch house 
may be reported in the clearings of the city in which 
it is located and again as part of the business cleared 
by the main office in the home city. Just what the 
percentage of duplication is, it is impossible to 
determine, but it is probably small compared with 
the total clearings of the country. 

Now that the Federal Reserve System is in full 
operation, it is possible to get a record of total bank 
transactions which is even more comprehensive 
than bank clearings. 

CONCLUSIONS RELATIVE TO BANK CLEARINGS 
1. During a Period of Business Depression. 

(a) An increase signifies that trade is improv¬ 
ing. 

(b) A decrease signifies that trade conditions 
are growing worse. 


250 


BUSINESS BAROMETERS 


(c) No change signifies that trade conditions 
are remaining fixed. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase signifies that trade is continu¬ 
ing to improve. 

(b) A decrease signifies that the improvement 
has temporarily been checked. 

(c) No change shows that progress is very 

slow. 

3. During a Period of Over-expansion. 

(a) An increase shows that trade conditions 
are very prosperous, although too great an increase 
under such conditions forecasts trouble. 

(b) A decrease shows that a change is taking 
place and business is decreasing. 

(c) No change at this point often is a sign that 
a change is about to take place. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies a temporary check in 
the decline. 

(b) A decrease is the natural movement and 
signifies no improvement. 

(c) No change shows uncertainty or possibly 
serves to delay the coming depression. 

BUSINESS FAILURES 

Every great crisis has been made known to the 
public by one or more large failures, sometimes 
accompanied by the exposure of dishonest methods, 
sometimes by political or national calamity; more 


FAILURES 


251 


often by the failure of some bank or number of 
banks in endeavoring to finance industries or new 
corporate undertakings. So failures,— that is 
large, single failures,— stand as signals of sharp 
crises, and the beginning of depression. They may 
be followed by other large failures and many small 
ones, so quickly that the total both in the number 
of failures and in liabilities for the panic year is 
swelled, as in 1893, far above the limits of other 
years just preceding and following it; or the failure 
record may move slowly and may require more 
than a year for any great change. Failure statis¬ 
tics, therefore, are of use principally in determining 
the probable length of a period of depression as 
shown by the following figures. From these, it will 
be seen that after a crisis in no case has over-ex¬ 
pansion returned until failure statistics have again 
become normal. 

FAILURE STATISTICS FOR THE UNITED STATES 
Table I 


Compiled from figures furnished by R. G. Dun & Co. 


Year 

No. of 

Liabilities 

Year 

No. of 

Liabilities 


Failures 

in Millions 


Failures 

in Millions 

1857 

4,932 

291.8 

1871 

2,915 

85.2 

1858 

4,225 

95.7 

1872 

4,069 

121.1 

1859 

3,913 

64.4 

1873 

5,183 

228.5 

1860 

3,676 

79.8 

1874 

5,830 

155.2 

1861 

6,993 

207.2 

1875 

7,740 

201.0 

1862 

1,652 

23.0 

1876 

9,092 

191.1 

1863 

495 

7.9 

1877 

8,872 

190.7 

1864 

520 

8.6 

1878 

10,478 

234.4 

1865 

530 

17.6 

1879 

6,658 

98.1 

1866 

1,505 

53.8 

1880 

4,735 

65.8 

1867 

2,780 

96.7 

1881 

5,582 

81.2 

1868 

2,608 

63.7 

1882 

6,738 

101.5 

1869 

2,799 

75.0 

1883 

9,184 

172.9 

1870 

3,546 

88.2 

1884 

10,968 

226.3 


252 BUSINESS BAROMETERS 


Year 

No. of 

Liabilities 

Year 

No. of 

Liabilities 

Failures 

in Millions 


Failures 

in Millions 

1885 

10,637 

124.2 

1904 

12,199 

144.2 

1886 

9,834 

114.6 

1905 

11,520 

102.7 

1887 

9,634 

167.6 

1906 

10,682 

119.2 

1888 

10,679 

123.8 

1907 

11,725 

197.4 

1889 

10,882 

148.8 

1908 

15,690 

222.3 

1890 

10,907 

189.9 

1909 

12,924 

154.6 

1891 

12,273 

189.9 

1910 

12,652 

201.7 

1892 

10,344 

114.0 

1911 

13,441 

191.1 

1893 

15,242 

346.8 

1912 

15,452 

203.1 

1894 

13,885 

172.9 

1913 

16,037 

272.6 

1895 

13,197 

173.2 

1914 

18,280 

357.9 

1896 

15,088 

226.1 

1915 

22,156 

302.3 

1897 

13,351 

154.3 

1916 

16,993 

196.2 

1898 

12,186 

130.7 

1917 

13,855 

182.4 

1899 

9,337 

90.9 

1918 

9,982 

163.0 

1900 

10,774 

138.5 

1919 

6,451 

113.2 

1901 

11,002 

113.1 

1920 

8,881 

295.1 

1902 

11,615 

117.5 

1921 

19,652 

627.4 

1903 

12,069 

155.4 

1922 

23,676 

623.9 


For example, note in the above table the year 
1857, both in number and liabilities. Note that 
the crisis is indicated in the amount of liabilities, 
for while in 1858 the number of failures is still 
large, there is a reduction of liabilities amounting 
to more than 67 per cent. The next three years 
show depression by a relatively large number of 
failures; but they are of lessening average amount 
of liabilities. That statistics of failures may indi¬ 
cate not only the length but the general character 
of a depression is proved particularly well from the 
course they take from the crisis year of 1873 to the 
height of the depression in 1878, and for a shorter 
period from 1893 to the culminating year of 1896. 
From the preceding table it is also evident that, 
while the average of liabilities per failure is less, the 
number of failures is often larger toward the end of a 
depression than during the crisis year. 


FAILURES 


253 


FAILURE STATISTICS FOR THE UNITED STATES 
Table II 

Compiled by figures furnished by R. G. Dun & Co. 


Year 

Number 


Average 

Liabilities 
per firm in 

Per cent 

Failures 

Liabilities 

Liabilities 

business 

failing 

1875 

7,740 

$201,060,333 

$25,960 

$339.78 

1.21 

1876 

9,092 

191,117,786 

21,020 

305.15 

1.33 

1877 

8,872 

190,669,936 

21,491 

302.60 

1.36 

1878 

10,478 

234,383,132 

22,369 

259.49 

1.55 

1881 

5,582 

81,155,932 

14,530 

108.65 

.71 

1882 

6,738 

101,547,564 

15,070 

129.94 

.83 

1883 

9,184 

172,874,172 

18,823 

210.23 

1.06 

1884 

10,968 

226,343,427 

20,632 

261.94 

1.21 

1885 

10,637 

124,220,321 

11,678 

137.28 

1.16 

1886 

9,834 

114,644,119 

11,651 

124.60 

1.01 

1893 

15,242 

346,779,889 

22,751 

290.65 

1.28 

1894 

13,885 

172,992,856 

12,458 

155.25 

1.25 

1895 

13,197 

173,196,060 

13,124 

145.06 

1.09 

1896 

15,088 

226,096,834 

14,992 

190.57 

1.31 

1900 

10,774 

138,495,673 

12,854 

119.63 

.92 

1901 

11,002 

113,092,376 

10,279 

94.63 

.90 

1902 

11,615 

117,476,769 

10,114 

94.85 

.93 

1903 

12,069 

155,444,185 

12,879 

122.33 

.94 

1904 

12,199 

144,202,311 

11,820 

111.33 

.92 

1905 

11,520 

102,676,172 

8,193 

78.75 

.85 

1906 

10,682 

119,201,515 

11,159 

86.52 

.77 

1907 

11,725 

197,385,225 

16,834 

139.75 

.82 

1908 

15,690 

222,315,684 

14,169 

153.58 

1.08 

1909 

12,924 

154,603,465 

11,964 

104.01 

.80 

1910 

12,652 

201,757,097 

15,947 

133.16 

.80 

1911 

13,441 

191,061,665 

14,215 

125.28 

.81 

1912 

15,452 

203,117,391 

13,145 

129.85 

.98 

1913 

16,037 

272,672,288 

17,003 

168.68 

.99 

1914 

18,280 

357,908,859 

19,579 

216.19 

1.10 

1915 

22,156 

302,286,148 

13,644 

180.49 

1.32 

1916 

16,993 

196,212,256 

11,547 

114.90 

.99 

1917 

13,855 

182,441,371 

13,168 

105.26 

.80 

1918 

9,982 

163,019,979 

16,331 

95.44 

.58 

1919 

6,451 

113,291,237 

17,561 

66.21 

.38 

1920 

8,881 

295,121,805 

33,231 

151.20 

.49 

1921 

19,652 

627,401,883 

31,926 

325.53 

1.02 

1922 

23,676 

623,896,251 

26,351 

314.61 

1.19 


254 


BUSINESS BAROMETERS 


From this second table we have another view of 
the usefulness of failure statistics. While, as in 
Table I, the panic years are also plainly marked in 
Table II, by the percentage of failures to the total 
number of firms in business, Table II, in addition, 
shows something new relative to business condi¬ 
tions. 

Thus we find that up to 1878 the possibility of 
loss, that is the ratios of “ liabilities ” to the “ num¬ 
ber of firms actually in business,” was large or in¬ 
creasing from year to year, as was also the case 
from 1893 to 1896; while, on the other hand, the 
effects of the crisis of 1903 gave place very quickly 
to prosperous conditions, surpassing any known in 
thirty years previous. Furthermore, from the 
“ per cent of failures ” to the firms in business we 
find, that such figures as 11,002 for the failures, in 
1901 and 10,478 for 1878 mark two degrees of de¬ 
pression more widely different than they would 
seem at first glance, and that the high number of 
11,725 of 1907, or even 15,690 in 1908, indicate con¬ 
ditions much less severe than does the 7,740 of 1875. 

But as the study of the past, however interesting 
as pure history, is here to be regarded only as a 
means of understanding the significance of current 
changes, the points above mentioned are of value 
only in connection with the present day figures. 

The figures of the year 1907 are of special interest 
in this connection. This year is known as a “ panic 


FAILURES 


255 


year,” and the events of the months following Octo¬ 
ber with its signal failures of certain New York 
banks have become a part of history closely joined 
to later problems. While it is true that not one, 
but all factors, must be weighed together in estimat¬ 
ing the comparative position of 1907 among critical 
periods, merchants, bankers and investors find 
something of special value in statistics of failures. 

Statistics of the year are available in different 
forms. Divided into months, as is the customary 
way for merchants to compile them, there is mean¬ 
ing to be found in the year’s record on lines similar 
to those used in the annual tables. The following 
figure for liabilities, expressed in millions, serve as 
illustrations: The “ number ” omitted from these 
tables will be found on the Statistical Tables and 
Charts* from 1914 on as will also the percent of 
failures to firms in business. If additional tables 
are desired, the “ percent to the firms in business ” 
is recommended. 


Table III 

LIABILITIES EXPRESSED IN MILLIONS 


Month 

1902 

1903 

1904 

1905 

1906 

1907 

1908 

Jan. 

$14,312 

$12,978 

$18,483 

$10,417 

$11,952 

$13,628 

$27,099 

Feb. 

11.302 

10.907 

15.812 

9.780 

10.859 

10.283 

27.064 

Mar. 

8.117 

10.458 

13.770 

9.964 

10.949 

8.163 

21.542 

Apr. 

May 

7.359 

11.811 

13.136 

8.056 

8.059 

11.082 

20.316 

. 9.109 

12.314 

9.817 

8.907 

12.992 

9.965 

13.643 

June 

10.173 

8.326 

8.469 

8.777 

7.850 

16.445 

14.708 

July 

6.932 

16.751 

*8.812 

6.148 

6.919 

12.334 

14.222 

Aug. 

8.068 

10.877 

10.491 

6.140 

8.821 

15.197 

23.782 

Sept. 

10.031 

7.229 

12.864 

8.039 

6.255 

18.935 

. 17.298 

Oct. 

10.851 

18.387 

10.525 

6.751 

10.553 

.27.414 

15.898 

Nov. 

9.276 

16.422 

8.535 

8.866 

11.980 

17.637 

12.599 

Dec. 

11.941 

18.978 

13.481 

10.823 

12.006 

36.296 

14.139 


* Tables on the Statistical sheet are an average of figures by Dun and 
Bradstreet. The above figures are by Dun alone. 


256 BUSINESS BAROMETERS 


Month 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

Jan. 

$14,008 

$32,015 

$24,090 

$19,770 

$22,972 

$39,374 

$49,641 

Feb. 

16.734 

27.435 

17.086 

21.477 

28.141 

22.354 

32.405 

Mar. 

13.718 

13.628 

18.474 

21.763 

25.718 

21.493 

23.658 

Apr. 

16.825 

17.752 

16.924 

16.874 

18.445 

20.549 

43.518 

May 

14.383 

9.590 

13.469 

15.277 

16.863 

23.447 

21.053 

June 

12.607 

11.817 

13.652 

12.847 

20.767 

57.881 

18.313 

July 

9.527 

13.790 

12.150 

16.098 

20.325 

20.377 

18.935 

Aug. 

9.620 

12.442 

11.116 

16.153 

20.848 

43.468 

17.734 

Sept. 

8.446 

15.933 

11.900 

13.280 

22.662 

23.018 

16.208 

Oct. 

12.529 

18.977 

19.270 

15.762 

20.245 

29.702 

25.522 

Nov. 

9.812 

11.324 

15.266 

15.646 

24.199 

25.489 

15.694 

Dec. 

14.625 

17.039 

17.659 

18.164 

31.480 

•30.899 

19.605 

Month 

1916 

1917 

1918 

1919 

1920 

1921 

1922 

Jan. 

$25,863 

$18,283 

$19,279 

$10,736 

$7,240 

$52,137 

$73,796 

Feb. 

18.744 

16.618 

12.829 

11.489 

9.763 

60.853 

72.608 

Mar. 

16.885 

17.406 

17.672 

13.595 

12.699 

67.409 

71.608 

Apr. 

18.383 

12.587 

14.271 

11.450 

13.224 

38.568 

73.059 

May 

19.466 

11.772 

13.135 

11.957 

10.826 

57.066 

44.403 

June 

11.929 

18.055 

10.607 

9.483 

32.991 

34.639 

38.242 

July 

11.647 

17.240 

9.789 

5.507 

21.906 

42.774 

40.010 

Aug. 

20.129 

18.085 

7.985 

5.932 

28.377 

42.904 

40.230 

Sept. 

11.569 

11.903 

17.407 

8.791 

29.554 

37.021 

36.908 

Oct. 

10.775 

12.812 

13.980 

6.872 

38.915 

53.059 

• 34.647 

Nov. 

14.105 

13.635 

13.815 

9.177 

30.758 

53.470 

40.265 

Dec. 

16.745 

14.044 

12.249 

8.300 

58.872 

87.502 

58.069 


This table gives examples of what may serve as 
types of years. Thus, 1903 had what was called 
“ the rich man’s panic,” beginning with the stock 
market in the summer of that year and continuing 
into the next as shown very clearly by the table. 
The presence of business trouble is first indicated 
in July of 1903, when the amount of liabilities is 
very much increased; and this increase and this 
‘ratio remain practically unbroken for ten months. 
Normal years, also, such as 1905 and 1906, show 
heaviest liabilities between October and March, 
any increase between these points coming just 
before or just after the fiscal year. 

While Table III is not in itself sufficient, the 
points just raised show the practical value of such 
figures. Even without knowing anything of the 
exact causes, a man with these figures at his hand 
could not have failed to think a little when, in the 


FAILURES 


257 


report for June, 1907, liabilities ran over 100% 
higher than in 1906 and nearly as much higher than 
1905. As the new figures were received each 
month, and liabilities for the month of September 
reached an aggregate of nearly $19,000,000 com¬ 
pared with $8,039,947 for the same number of 
failures in September, 1905, surely the change in 
ratio could have told something very definite as to 
the approach of bad times. By the quickest, 
roughest estimates, the course of affairs can be very 
plainly traced by having these failure statistics at 
hand. 

While to obtain accurate comparisons of the 
progress of the current year, as compared with 
others, more close calculating of the percentage in 
gain or loss per firm in business is always required, 
yet such work yields a good return. 

The following table (Bradstreet’s) is also of 
interest in connection wifh analyses of failures. 


PERCENTAGE OF FAILURES AND LIABILITIES CLASSIFIED 
AS TO CAUSE — UNITED STATES (PER CENT) 


Failures due to. 

. 1907 

Number 
1906 1905 

1904 

1907 

Liabilities 
1906 1905 

1904 

Incompetence. 

. 22.6 

22.3 

24.4 

23.1 

8.9 

15.5 21.6 

14.1 

Inexperience. 

4.9 

4.9 

4.8 

5.1 

3.2 

2.2 

2.1 

3.2 

Lack of capital. 

37.1 

35.9 

33.4 

32.2 

18.4 

30.9 33.0 

31.8 

Unwise credits. 

2.3 

2.6 

3.5 

3.4 

3.1 

2.1 

4.2 

4.8 

Failures of others .. 

1.4 

2.0 

2.2 

2.5 

3.3 

8.8 

4.5 

8.2 

Extravagance. 

.9 

1.0 

1.1 

.8 

.5 

.9 

1.2 

.7 

Neglect. 

2.5 

2.2 

2.9 

3.1 

.5 

1.5 

1.1 

1.6 

Competition. 

1.2 

1.0 

1.5 

1.3 

.4 

.4 

.9 

1.0 

Specific conditions.. 

16.3 

17.3 

16.3 

19.1 

51.7 

17.9 15.5 

22.7 

Speculation. 

.7 

.8 

.7 

.8 

4.9 

3.6 

7.7 

5.3 

Fraud. 

10.1 

10.0 

9.2 

8.6 

5.1 

16.2 

8.2 

6.4 

Failures due to. 

1911 

Number 
1910 1909 

1908 

1911 

Liabilities 
1910 1909 

1908 

Incompetence. 

27.0 

26.6 

24.2 

21.6 

23.5 

21.3 20.9 

16.0 

Inexperience. 

4.1 

4.4 

4.9 

4.0 

2.2 

1.9 

2.0 

1.8 

Lack of capital. 

31.4 

33.9 

34.5 

34.2 

28.3 

27.9 28.6 

27.2 

Unwise credits. 

2.0 

1.7 

1.9 

2.0 

2.2 

1.9 

3.2 

3.7 

Failures of others .. 

1.3 

1.0 

1.2 

1.8 

4.2 

3.1 

5.9 

5.0 

Extravagance. 

.9 

.7 

.9 

1.0 

1.2 

.5 

2.3 

.9 



















258 


BUSINESS BAROMETERS 


Failures due to. 

Neglect. .. 

Competition. 

Specific conditions.. 
Speculation....... 

Fraud. 


Failures due to. 

Incompetence. 

Inexperience. 

Lack of capital. 

Unwise credits. 

Failures of others .. 

Extravagance. 

Neglect. .. 

Competition... 

Specific conditions.. 

Speculation. 

Fraud. 


Failures due to. 

Incompetence. 

Inexperience. 

Lack of capital. 

Unwise credits. 

Failures of others .. 

Extravagance. 

Neglect. .. 

Competition. 

Specific conditions.. 

Speculation. 

Fraud. 


Failures due to. 

Incompetence. 

Inexperience. 

Lack of capital. 

Unwise credits. 

Failures of others .. 

Extravagance. 

Neglect. 

Competition. 

Specific conditions.. 

Speculation. 

Fraud. 


Number 


1911 

1910 

1909 

1908 

2.2 

2.5 

3.0 

2.2 

2.9 

2.6 

2.5 

1.8 

16.9 

14.4 

15.3 

18.9 

.7 

1.0 

.8 

1.0 

10.6 

11.2 

10.8 

11.5 


Number 


1915 

1914 

1913 

1912 

29.9 

28.0 

28.6 

30.2 

5.4 

5.6 

5.1 

4.6 

27.5 

29.4 

29.2 

29.7 

2.4 

2.5 

2.6 

2.0 

1.0 

1.8 

1.9 

1.3 

.6 

.9 

.8 

.7 

1.9 

2.2 

2.0 

2.0 

5.7 

3.0 

2.3 

1.9 

18.9 

16.4 

15.3 

16.5 

.4 

.7 

1.1 

.8 

6.3 

9.5 

11.1 

10.3 


Number 


1916 

1917 

1918 

1919 

33.2 

35.5 

36.5 

38.2 

6.0 

6.8 

6.7 

5.6 

30.3 

31.9 

33.2 

30.3 

1.9 

1.9 

1.3 

1.3 

.9 

1.0 

.9 

1.7 

.6 

.6 

.6 

1.1 

2.4 

2.2 

1.5 

1.7 

4.2 

2.1 

1.2 

1.1 

13.4 

.9 

11.9 

11.3 

.4 

.4 

.4 

.7 

6.7 

5.7 

5.8 

7.0 


Number 

1920 1921 1922 

32.5 32.0 34.2 

6.6 5.7 4.7 

32.3 29.3 30.8 

1.6 1.1 1.3 

1.2 1.1 1.2 

1.2 .4 .7 

1.3 1.3 1.1 

1.3 .9 1.1 

14.4 23.2 20.9 

.6 .3 .3 

7.0 4.7 3.7 


Liabilities 


1911 

1910 

1909 

1908 

1.3 

.9 

2.1 

.8 

4.8 

1.9 

1.4 

1.7 

20.7 

21.1 

20.2 

31.3 

2.7 

7.4 

4.4 

4.7 

8.9 

12.1 

8.4 

6.9 


Liabilities 


1915 

1914 

1913 

1912 

17.3 

13.4 

18.4 

26.8 

2.4 

1.9 

2.0 

3.0 

28.4 

31.6 

24.9 

33.5 

3.9 

3.2 

16.0 

2.6 

9.2 

16.7 

11.4 

4.9 

.6 

.6 

.6 

.9 

1.0 

1.0 

.7 

1.0 

3.3 

1.2 

.9 

1.3 

24.7 

19.8 

14.0 

13.8 

2.2 

3.5 

2.7 

3.4 

7.0 

7.1 

8.4 

8.8 


Liabilities 


1916 

1917 

1918 

1919 

21.8 

25.3 

26.9 

22.6 

4.4 

5.2 

4.7 

4.8 

31.9 

32.7 

30.8 

25.5 

2.6 

1.8 

1.8 

3.9 

4.6 

5.9 

3.3 

3.3 

.6 

.6 

.6 

1.2 

1.0 

.8 

.9 

.8 

2.5 

2.1 

.8 

.8 

19.3 

14.2 

19.8 

20.5 

3.9 

1.5 

1.2 

2.3 

7.4 

9.9 

9.2 

14.3 


Liabilities 


1920 1921 

1922 

13.3 22.2 

21.6 

3. 

3 

2.9 

1.9 

26.6 21.9 

24.4 

3.7 

3.9 

1.5 


8 

1.8 

2.5 


3 

.3 

.6 


5 

.4 

1.0 


3 

.3 

1.2 

45! 

5 42.1 

37.0 

1.9 

1.1 

1.8 

3.8 

3.1 

6.5 


For example, if 1907 showed, as is claimed, 37.1% 
of failures due to lack of capital, and if figures show 
that this cause is increasing year by year, it means 
clearly that the beginnings of new enterprises must 
be increasingly well supported, as it grows more 
difficult to add to inadequate capital when money 
rates are high or when competition makes it im- 








































FAILURES 


259 


perative to expand. As inexperienced and com¬ 
paratively incompetent heads must continually 
join the business ranks, constant watching of the 
details of failure statistics is a practical necessity 
for them as well as for those whose money is in¬ 
vested in their interests. 

As Bradstreet’s table excludes all losses except . 
those strictly commercial (that is, it includes only 
those failures involving loss to creditors of individ¬ 
ual firms or corporations engaged in legitimate 
mercantile occupations), they cannot be compared, 
figure for figure, with the tables from other sources; 
but believing that the figures due to failure in in¬ 
surance, real estate, brokerage, etc., do have a 
distinct effect upon general business conditions, the 
analysis of these also should be a part of a study of 
the whole subject. 

Certain further facts should be mentioned here 
as bearing upon this question. One of these we 
have already suggested, namely: that as the coun¬ 
try advances, statistics furnish evidence that the 
“ commercial death rate ” is growing less. The 
decrease is as yet not one-half of one percent, but 
the rate is being reduced from l}4% maximum to 
something under 1%. Of course, we should like to 
believe that this is a permanent improvement in 
business intelligence, but this point the future alone 
can prove. 

Another law recognized by merchants and al¬ 
ready suggested in this discussion, is that small 
firms do not feel the effect of a panic or depression 
until some time after the effect is felt by the larger 


260 


BUSINESS BAROMETERS 


firms. For this and other reasons, the study of 
this subject is especially valuable as a guide and 
protection to small merchants and storekeepers. 

In conclusion I will repeat that figures on busi¬ 
ness failures are of greatest value to all in deter¬ 
mining what the length of the present “ period ” 
will be, and how soon one’s own business and that 
of others, in which he has greater or less invest¬ 
ments of capital, may be expected to show a change. 
When the flood begins to subside from its high 
water mark, a study of the rate at which it is sub¬ 
siding, and a knowledge of the condition of each 
tributary stream assists very much in estimating 
the time when seed may be planted in the rich bot¬ 
tom land, now under water, or inversely as the case 
may be. We need not carry this figure of speech 
further in order to show that it contains the idea 
upon which merchants rate the study of Business 
Failures as of fundamental importance to their 
progress. For such study is but a part of a system 
by which they may know exactly the conditions 
upon which the next move should be based, and 
upon the result of which depends the subsequent 
course of the business life of each individual. 

The following conclusions are suggested relative 
to “ Business Failures.” 

1. During a Period of Business Depression. 

(a) An increase signifies that the depression is 
not ended. 

(b) A decrease, after a large increase, signifies 
improvement. 


LABOR CONDITIONS 


261 


(c) No change signifies that caution is still 
necessary. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase in failures signifies that the 
improvement has been temporarily checked. 

(b) A continued decrease signifies continued 
improvement. 

(c) No change signifies that caution is still 
necessary. 

3. During a Period of Over-expansion. 

(a) An increase in failures, especially of large 
concerns, forecasts a decline. 

(b) A great decrease signifies the need of 
caution. 

(c) No change signifies nothing of importance. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies no immediate inr 
provement. 

(b) A decrease signifies a temporary check in 
the decline or an improvement. 

(c) If there is no change the figure need not be 
considered. 

LABOR CONDITIONS 

The general subject of labor conditions is of im¬ 
portance in diagnosing present business conditions 
and in forecasting changes which may be expected. 
But labor interests involve so many factors and 


262 


BUSINESS BAROMETERS 


include so wide a field of investigation that, with 
the statistics at present available, it is absolutely 
impossible to compile figures that are sufficiently 
complete to tabulate for comparative purposes. 

During the past few years important statistical 
contributions have been made by the United States 
Bureau of Labor Statistics, New York State In¬ 
dustrial Commission, Wisconsin Industrial Com¬ 
mission, Massachusetts Bureau of Statistics and 
certain others. Annual statistics of union wage 
scales in certain trades are also available. 

While these records are by no means complete, 
they show what can and eventually will be done to 
secure accurate information on labor conditions. 
The difficulty with all these records today, how¬ 
ever, is that they extend back over only a short 
period of years. They are valuable for determining 
the present trend, but great care must be taken in 
drawing conclusions as to their indications of the 
future. The record of immigrants arriving and de¬ 
parting is practically the only subject which re¬ 
flects the labor situation and which can be carried 
back over a period of time. 

The data furnished by the Department of Labor 
are very important inasmuch as they cover such a 
wide geographically distribution and unlike the 
Massachusetts data include a diversified list of in¬ 
dustries. This work was started by the United 
States Bureau of Labor Statistics in October, 1912, 
so that since that time monthly data is available. 

The index includes in its distribution approxi¬ 
mately six hundred to eight hundred thousand wage 


LABOR CONDITIONS 


263 


earners and includes the automobile, iron, steel in¬ 
dustries, textiles, boot and shoes, tire, chemical, 
clothing and in all about fifty industries. The 
data shows the number on the payroll as well as 
the total amount.of the payroll, in a manner simi¬ 
lar to the index numbers on employment conditions 
used on our Statistical Tables and Charts. Taken 
in conjunction with the New York figures, it is 
now possible to get a survey of employment cover¬ 
ing almost a million and a half men. 

About ten years ago we began publishing the 
reports on current strikes which appear in the 
Strike Table shown on the following page. 

When this record was started it was considered 
not quite good form to publish reports of strikes. 
It was felt that a man’s strikes were his own prop¬ 
erty and many employers resented newspaper 
publicity on strikes as completely as a man would 
resent publicity about his domestic troubles. 

These, when tabulated over a term of years, give 
a report that possesses high value. By charting 
these strikes, it is possible to show the trend of 
strike activity from year to year; to show the pre¬ 
war normal level of strikes; to compare the present 
with that level, and to show at any time exactly 
where we are in this matter of labor disturbances. 

The personal element, human temperament and 
so on, enter into strikes to such an extent that we 
have wide variations from any standard. Still, 
taking the ten-year survey, it is possible to draw 
much valuable data from the strike reports. 

The attitude of labor all over the United States 



This table of strikes has been prepared from actual records collected weekly for the past eight years. A sea¬ 
sonal trend is evident, reaching its high point in the middle of the summer and the low point at the first of the year. 
It may have seemed to some that strikes have increased each year, but this record shows they have worked from 
what might be called “ normal ” in 1915 to a high point in 1919, and have since worked back toward normal again. 






























































IMMIGRATION 


265 


changes radically as we go from expansion to de¬ 
pression, or vice versa. When jobs are many and 
men are scarce, labor assumes a more or less arro¬ 
gant air. By “ more or less,” we mean that the 
greater the urgency of the labor market, the more 
powerful labor becomes. During the phenomenal 
period of the World War this fact was illustrated to 
the extreme. Never before in the history of the 
United States has labor had such an advantage in 
the market as it had during those years. Four 
million men were withdrawn from the productive 
forces of the country and put into our army and 
navy. Other millions were engaged in supplying 
these forces with sustenance and war material. 
The balance were left with the ordinary production 
work of the country on their hands. Furthermore, 
immigration was suspended and the ever-fresh sup¬ 
ply of cheap labor was thus cut off. 

In consequence the workers had the advantage 
all on their side. They were for the most part 
loyal and intent on serving their country. But the 
urgency created by mounting living costs, coupled 
with the power that conditions gave them, resulted 
in a nation-wide move on the part of labor to better 
its conditions. 

The outstanding symptom of this development 
is the frequency of strikes. All through the war and 
during the period of post-war expansion the strike 
curve was far out of normal. Labor used its eco¬ 
nomic power and employers were generally unable 
successfully to cope with this power. The majority 
of the strikes were successful. 


266 


BUSINESS BAROMETERS 


It should be noticed that any marked change in 
the number of strikes accompanies a corresponding 
change in the business situation. So long as the 
reported strikes remain above the normal, we know 
that the advantage in the industrial struggle lies 
with the employes. When these conditions re¬ 
verse, the change will show itself in the reports on 
strikes and wage changes. If we had no other 
data on business conditions it would still be pos¬ 
sible to make a fairly good picture of fundamental 
business from the data. 

As a barometer of labor conditions, immigration 
and emigration figures previous to the war were 
extremely good. In peace times the steamship 
lines maintain a balance in the supply of labor 
between the United States and Europe. Labor, 
like water, seeks its own level, when both living 
expenses and wages are considered. Of course, if 
if costs five times as much to live in New York as 
in Italy, the Italian laborer will not come to this 
country for simply five times the wages that he 
receives at home, provided the demand for labor is 
the same in each country. Therefore, living ex¬ 
penses, as well as wages, must be considered. On 
the other hand, if the Italian can obtain wages in 
New York equal to ten times what he will receive 
in Italy, he will board a steamer for the United 
States, even with the expenses in New York five 
times as great as at home. Such high wages the 
Italian may always obtain in America in times of 
over-expansion, and especially in times just preced¬ 
ing the culmination of a period of over-expansion. 


IMMIGRATION 


267 


Conversely, when this period culminates, the 
demand for labor decreases, wages decrease and the 
Italian boards a steamer and returns to Italy. 
Therefore, as the Government keeps a careful 
record of when the Immigrant enters the country 
and when he leaves, this report is an extremely good 
barometer of unskilled labor conditions in the 
United States. Of course, under almost any cir¬ 
cumstances, there are more people coming into a 
new country, like the United States, than there 
are going out, but the size of this excess number is 
very sensitive to changing conditions in the coun¬ 
try as a whole. 

There is also another reason why these various 
figures are of interest; namely: because the num¬ 
ber of aliens entering or leaving the country is not 
only a barometer of business conditions, but it is 
also influential in the trend of such conditions. 
When a foreigner enters this country, he usually 
brings a little money, for he knows that he will 
need a place in which to sleep while here and must 
have some food and clothes. On the other hand, 
when leaving the country he takes from circulation 
a certain amount of money which is almost in¬ 
variably many times what he brings into the 
country. In addition, he directly reduces the in¬ 
come of some landlord and the business of some 
small grocer and dealer in second-hand clothing. 

In the absence of war or other artificial restric¬ 
tions the following conclusions are suggested rela¬ 
tive to immigration figures.* 

* These figures have special bearing on the demand for unskilled labor 
in the United States. 


268 


BUSINESS BAROMETERS 


1. During a Period of Business Depression. 

(a) An increase after a distinct decrease shows 
that conditions are improving. 

(b) A continued decrease signifies that as yet 
there is no improvement. 

(c) No change signifies that conditions are at 
a standstill. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies no immediate improve¬ 
ment. 

(c) No change signifies no definite trend. 

3. During a Period of Over-Expansion. 

(a) A great increase signifies no further im¬ 
provement or a decline. 

(b) A decrease signifies that the corner is being 
turned and a decline may be expected, and thus 
calls for caution. 

(c) No change signifies continued improve¬ 
ment. 

4. During a Period of Decline Following a Period 

of Over-Expansion. 

(a) An increase signifies a temporary improve¬ 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing definite. 


CHAPTER VII 

SUBJECTS RELATING ESPECIALLY TO MONETARY 
CONDITIONS 

MONEY IN CIRCULATION 

T HIS subject may, at first thought, seem un¬ 
interesting and of little concern to the mer¬ 
chant or manufacturer; yet, as a matter of 
fact, the “ Amount of Money in Circulation ” is of 
vital interest not only to the merchant and manu¬ 
facturer, but also to the humblest store-keeper and 
day laborer. 

The trade of the corner grocery store is regulated 
by the amount of money in circulation in the neigh¬ 
borhood; and the amount of money in circulation 
in the neighborhood is dependent upon the amount 
circulating in the entire country. As the local 
banks in every small town have deposits in some 
large city such as New York, Chicago or St. Louis, 
money cannot be abundant in one city and scarce 
in another, except for a very short time. The 
banks of the various cities are so related through 
the Federal Reserve System, that money — like 
water — immediately seeks its own level. As a re¬ 
sult, all parts of the country must prosper or suffer 
in accordance with the amount of money in circu¬ 
lation. The store-keeper must, therefore, study 
figures of the entire country, and not simply the 
conditions in his own town or in his own neighbor¬ 
hood. 



270 


BUSINESS BAROMETERS 


Many a mill has been closed and many a laborer 
been thrown out of employment because employers 
could not obtain enough actual money to pay 
wages. In boom times such conditions are hard to 
conceive; nevertheless, they have happened many 
times. Sometimes mills continued to operate by 
paying their employees by check, although this is 
a very unsatisfactory method unless the checks can 
be readily cashed. We know of one city in Massa¬ 
chusetts where for several weeks in 1907, all of 
the factory hands and clerks were paid'by checks, 
and moreover by checks marked “ Payable only 
through Clearing House.” Checks so marked can¬ 
not be cashed. The holders could only deposit 
them in the bank and draw new checks against 
them; and, since these new checks were also marked 
“ Payable only through Clearing House,” it was 
still impossible for the employees to obtain their 
cash. As 95% of the employees had no bank 
account, the only practical method was for each to 
give his check to one of the local store-keepers, 
receiving credit for the amount. As the man was 
obliged to leave the full amount of the check at one 
store, he found it advisable to select a large depart¬ 
ment store, carrying dry goods, groceries, medicines 
and other goods. The result was that the business 
of the small store-keepers, excepting that derived 
from their regular “ charge ” customers, was almost 
ruined during this period; the business of a store, 
the cash sales of which ordinarily amounted to $100 
a day, decreased to only $10 a day. This is but 
one illustration; it shows, nevertheless, how vital 


MONETARY CONDITIONS 


271 


an interest everyone has in the amount of money 
in circulation. 

It is of equal importance to the large merchants 
and to the manufacturers. The small retailer who 
buys only what goods he can sell immediately, 
ceases purchasing as soon as his business diminishes. 
This immediately affects the business o£ the manu¬ 
facturer, who in turn ceases to purchase from the 
large producers. Since the small manufacturer 
buys new material only as needed for actual manu¬ 
facture, he ceases to purchase in direct proportion 
as he reduces his help. The great merchants and 
manufacturers do not feel the effect, possibly until 
later; but when the blow does come, they feel it to 
a greater extent than the small dealer. It may be 
plainly seen, therefore, that the amount of money 
in circulation directly affects every one, whether 
laborer, clerk, small store-keeper, merchant, large 
manufacturer or the railroad company which trans¬ 
ports for all. 

The Terms Defined. 

In the discussion of this subject, two different 
“ amounts ” are referred to, viz.: 

1. The gross amount of money per capita, whether 
hoarded or in use. 

2. The net amount of working money in circula¬ 
tion. 

These two amounts may be defined as follows: 

“ The gross amount of money per capita ” in¬ 
cludes all money in the United States whether it is 
in the bank or buried in the ground, at work or idle. 
All money in the safe deposit boxes and in the 


272 


BUSINESS BAROMETERS 


pockets of individuals is counted in this item. 
This amount of money in circulation formerly 
stood at about $35* per capita, based on the esti¬ 
mated population of the United States. The gross 
amount of money per capita simply represents the 
total of the gold and silver coins and bills and bank 
notes in existence, wherever located in the United 
States. It has been estimated that in order to keep 
this figure in the vicinity of $34 or $35 per capita, 
it is necessary to create or import about $50,000,000 
net in coin and bills each year. 

The “ net amount of working money ” means the 
amount in actual use in making payments from 
day to day plus the sum of checks drawn against 
bank deposits. When a farmer deposits in his 
bank, money received from the sale of cotton in 
Liverpool, he increases the gross amount of money 
in circulation but not the net unless the bank loans 
the money out to someone else. When he checks 
this out to an American firm in payment for fer¬ 
tilizer he increases the net amount of active money 
but not the gross. Should he draw this money out 
and hoard it he does not affect the gross amount of 
money in the country but may indirectly affect the 
net by curtailing the loaning power of the bank. 

But “ the net amount of working money in cir¬ 
culation ” is affected in another way, namely: by 
the amount of money that each man is carrying in 

* Rose after the World War (November, 1920) to $59.77. Beginning 
July 1, 1922, the form of circulation statement was revised so as to exclude 
all forms of money held by the Federal Reserve banks and Federal Reserve 
agents. This change results in showing a per capita circulation at the 
peak in November, 1920, of $52.36. On May 1, 1923, the circulation was 
$42.04, whereas under the method heretofore used it would have been 
$52.61. 


MONETARY CONDITIONS 


273 


his pocket. If a man carries eleven dollars in his 
pocket instead of one dollar, he seldom realizes that 
the act is affecting the financial condition of the 
country; but if 15.,000,000 working men in the 
United States should do this same thing, it would 
make a difference of $150,000,000 in the net amount 
of working money in circulation, or a difference of 
$500,000,000 in the banking resources of the coun¬ 
try. Thus the net amount of working money in 
circulation represents the amount which is actually 
in the banks or actually at work in commerce and 
industry; it does not include idle money stowed 
away in pocketbooks or safe deposit boxes. 

Experience has shown that the “ net amount of 
working money in circulation ” cannot be forecast 
by figures, but is dependent rather upon sentiment. 
In other words, instead of being dependent upon 
the financial condition, it is dependent rather upon 
the sentiment of the people. This net amount in 
circulation may remain practically constant for 
years until some large failure, scandal or rumor of 
war comes, when the people lose confidence and 
money stops circulating. In such cases, everybody 
holds all he has in his possession and free circulation 
is stopped or retarded. Thus the net amount of 
working money is often independent of the gross 
amount of money in circulation. Should a rumor 
be published in the morning papers that some great 
financial institution is in a critical condition, the 
net amount of money in circulation would immedi¬ 
ately be affected to a greater extent than would be 
possible through years of legislation; but the gross 


274 


BUSINESS BAROMETERS 


amount of money would remain constant. Fur¬ 
thermore, such rumors, failures or scandals are the 
best warnings of impending contraction of the net 
amount of money in circulation.. The study of sta¬ 
tistics in such instances is of little value. In other 
words, as soon as such a thing happens, the mer¬ 
chant may be reasonably certain that his trade will 
be diminished, and the effect of his curtailment will 
be felt by the manufacturers, the middlemen and 
the railroads. 

On the other hand, the merchant' should be 
equally on the watch for the time when confidence 
will be restored and when the people will decide to 
part with the money they have been hoarding. As 
it is human nature to hoard money in case of 
trouble, it is also human nature to forget this trouble 
quickly. Moreover, people seem unable to withhold 
money from circulation beyond a certain length of 
time; they become uneasy under the loss of inter¬ 
est, and it finally occurs to them that their money is 
in more danger in their houses than when deposited 
in a bank. Thus periods of financial stringency, 
which were caused by the temporary withdrawal of 
money from circulation, were invariably followed 
by a great increase in the net amount of working 
money. Nevertheless, the business of the merchant 
does not increase directly in proportion to the increase 
of the net amount of working money. While business 
falls off as soon as the working money decreases, the 
reverse is not true. 

When mills are closed and people are out of 
employment, they acquire frugal habits, and after 


MONETARY CONDITIONS 


275 


the mills again start, they do not at once begin to 
spend; but they deposit their savings in a bank. 
The fact remains, nevertheless, that after these 
periods of fright, money becomes very plentiful 
with the banks and interest rates become corre¬ 
spondingly low, with a slow but gradual increase 
in business. As the efficiency of money depends 
upon its rapidity of circulation, a contraction in the 
net amount of working money always causes a de¬ 
crease in general business which requires some time 
to return to a normal state. 

In the case of the “ gross amount of money per 
capita,” entirely different laws prevail. To quote 
from Theodore E. Burton’s admirable book entitled 
“ Crises and Depressions ”: — “ Paradoxical as it 
may seem, the starting point for crises and depres¬ 
sions may be found in abundance rather than in 
scarcity, whether in money or in capital.” Here 
he refers to the “ total gross amount of money per 
capita ” or the figures which are studied under 
fundamental statistics. The best statistics avail¬ 
able may be obtained from tables prepared each 
month by the U. S. Government. In general, these 
figures usually show a continued increase up to a 
certain point, at which time a panic or a depression 
comes over the country. This is due to the fact 
that' panics and depressions are so often caused by 
over-prosperity. Therefore, this gross amount of 
money per capita is a good barometer of prosperity. 
If the gross amount of money in circulation, as 
reported by the government, shows a steady in¬ 
crease per capita for several years and the country 


276 


BUSINESS BAROMETERS 


is prosperous — mills running overtime, labor in 
great demand, and everybody happy and con¬ 
tented — then the merchant and manufacturer 
should be on the watch for a turn in the tide. In 
other words, too large an amount of money per 
capita is sure to be followed by a period of disaster 
and trouble. As “ pride cometh before destruction 
and a haughty spirit before a fall,” so it is likewise 
true that “ a large amount of money appeareth be¬ 
fore a panic and a period of luxury before a period 
of depression.” 

The following conclusions may be of interest rela¬ 
tive to net amount of working money in circu¬ 
lation*: 

1*. During a Period of Business Depression. 

(a) An increase signifies declining money rates, 
and more satisfactory conditions. 

(b) A decrease signifies higher money rates and 
less satisfactory conditions. 

(c) No change signifies nothing important. 

2. During a Period of Business Improvement. 

(a) An increase forecasts better conditions. 

(b) A decrease forecasts a check or setback. 

(c) No change suggests nothing of importance. 

3. During a Period of Over-expansion. 

(a) A large increase calls for caution. 

(b) A sudden decrease signifies higher money 
rates and forecasts reaction. 

(c) No change signifies continued prosperity. 

* The reader should study “ The Purchasing Power of Money,” by Irving 
Fisher, Professor of Political Economy at Yale University. The Mac¬ 
millan Co. 


REPORTS OF COMPTROLLER 


277 


4. During a Period of Decline Following a Period of 
Over-exjpansion. 

(a) An increase checks the decline, but fore¬ 
casts continued unsatisfactory conditions. 

(b) A decrease forecasts higher money rates 
and continued decline. 

(c) No change suggests caution. 

REPORTS OF THE COMPTROLLER OF THE 
CURRENCY 

Each national bank is required to make three re¬ 
ports a year to the Comptroller of the Currency. 
The reports are verified under oath by the president 
and cashier and are attested by at least three di¬ 
rectors of each bank. They give in detail the re¬ 
sources and liabilities of all national banks at a 
date specified by the Comptroller, and always 
previous to the date of the call. Each report must 
be mailed to the Comptroller within five days after 
the request is made for it. Such reports are the 
basis of a most useful examination of the banking 
situation, as they include not only figures from all 
national banks but also annual supplementary 
figures relative to other banks. 

These figures should be studied both independ¬ 
ently and in their relation to one another. In 
other words, the “ ratios ” should be studied and 
compared. This is one of the principal features of 
these reports as used in connection with the study 
of “ Fundamental Statistics.” They will be found 
more fully explained under the headings of “ Loans” 
“ Reserves,” etc. 


278 


BUSINESS BAROMETERS 


LOANS OF THE BANKS 

In analyzing reports of the Comptroller of the 
Currency, four distinct lines of investigation are 
followed, namely: 

(a) The ratio of bank “ Loans ” to bank “ Re¬ 
sources. 

(b) The ratio of bank Loans and Invest¬ 
ments ” to bank “ Resources.” 

(c) The ratio of “ Reserves ” of the banks to 
the “ Deposits.” 

(d) The ratio of the “ Reserves ” of the banks 
to the “ Resources.” 

These four distinct subjects should be studied in¬ 
dependently before making any deduction or fore¬ 
casting business conditions. It is also instructive 
to study the relation of loans to deposits. Then 
(a) should be compared with (b), and (c) with (d). 
In order to save time and space, the first two are 
here treated together, and the second two are 
treated together under another heading. 

Bank Loans: Bank loans include notes, dis¬ 
counts, overdrafts, and all other forms of so-called 
liquid assets. Banks when first organized were ex¬ 
pected to serve two purposes: they were to receive 
money on deposit and they were to loan it to de¬ 
positors, with the understanding that all deposits 
could be withdrawn and all loans called for payment 
at any time. The most ideal conditions are to be 
found where banks still keep most closely to the 
standard above laid down. All of the assets of a 
bank other than cash on hand, etc., should consist 


BANK LOANS 


279 


of loans that can be liquidated within six months. 
Therefore the term “ Loans and Discounts ” would 
include all notes, etc., which are either payable on 
demand or are payable within six months or a year 
at the utmost. 

Investments: In reality, a bank is loaning money 
to a corporation whether it purchases its fifty-year 
debenture bonds or its six-months’ notes. In either 
case the security is the same and the interest may 
be the same. For an investor, the fifty-year bonds 
if properly secured, are often a more practical 
purchase than the notes; but for a bank the same 
statement cannot be made. Strict adherence to 
the original principle of banking often demands 
that a bank shall refuse to purchase the bonds of a 
corporation of which it may willingly accept the 
notes. 

Notes when purchased by banks may be listed 
under the head of “ Loans and Discounts,” but 
bonds so purchased must be listed under the head 
of “ Investments.” The national law forbids the 
purchase by national banks of real estate, except as 
a building site, or real estate mortgages, because 
real estate cannot be readily sold, even though in 
many cases it is the safest form of investment. 
Logically there seems to be no reason why a national 
bank should be, allowed to buy fifty-year bonds 
and forbidden to purchase improved real estate, but 
the fact that the prohibition is made shows that the 
spirit of the law is against all forms of permanent 
investments. Therefore, by such reasoning, all 
stocks, bonds and notes, which do not mature for 


280 


BUSINESS BAROMETERS 


six months or more, come technically under the 
head of “ Investments,” As there is no law which 
states exactly the difference between “ Loans ” and 
“ Investments,” banks differ regarding the defini¬ 
tion, many banks placing under the head of loans, 
even such short term notes as do not mature for 
two or three years. 

Resources: The “ Resources ” of a bank are the 
same as the resources of any individual or nation. 
They include the notes, discounts, loans, stocks, 
bonds, real estate and other property which the 
bank holds. When a bank makes an appraisal of 
its total assets, figured on a conservative basis, the 
resulting figure represents the “ Resources.” The 
greater the proportion of “ Loans ” to “ Resources,” 
the less normal are banking conditions. 

We think that the above definitions in them¬ 
selves are sufficient to convince the reader of the 
truth of the following statement: 

(1) The banking situation of the country becomes 
more critical as the 'proportion of loans to resources 
increases, and improves as the proportion of loans to 
resources decreases. 

If all national banks confined themselves to loans 
and discounts, and ftiade no permanent invest¬ 
ments, excepting to the extent of their capital, it 
would be a very easy matter to judge the conditions 
in accordance with the above rule. As, however, 
practically all banks place a large amount of funds 
in more permanent investments, that item must 
be independently analyzed and the above rule must 
be supplemented by the following: 


LOANS AND RESOURCES OF THE UNITED STATES BANKS 


Date Banks Reporting 


Loans 


1865 

1866 

1867 

1868 

1869 

1870 

1871 

1872 

1873 

1874 

1875 

1876 

1877 

1878 

1879 

1880 
1881 
1882 

1883 

1884 

1885 

1886 

1887 

1888 

1889 

1890 

1891 

1892 

1893 

1894 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

1904 

1905 

1906 

1907 

1908 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

1921 

1922 


1,960 

2,267 

2,279 

2,293 

2.354 
2,457 
2,796 
3,066 
1,968b 
1,983b 
3,336 
3,448 

3.354 
3,229 
3,335 

3.355 
3,427 
3,572 
3,835 
4,111 
4,350 
4,378 
6,179 
6,647 
7,203 
7,999 
8,641 
9,338 
9,492 
9,508 
9,818 
9,469 
9,457 
9,485 
9,732 

10,382 

11,406 

12,246 

13,684 

14,850 

16,410 

17,905 

19,746 

21,346 

22,491 

23,095 

24,392 

25,195 

25,993 

26,765 

27,062 

27,513 

27,923 

28,880 

29,123 

30,139 

30,812 

30,389 


$362,400,000 

550,400,000 

588,500,000 

655,700,000 

686,300,000 

719,300,000 

789,400,000 

871,500,000 

1,439,900,000 

1,564,500,000 

1,748,100,000 

1,727,100,000 

1,720,900,000 

1,561,200,000 

1,507,400,000 

1,662,100,000 

1,901,900,000 

2,050,300,000 

2,233,600,000 

2,260,700,000 

2,272,300,000 

2,456,700,000 

2,944,900,000 

3,161,100,000 

3,475,200,000 

3,842,100,000 

3,965,900,000 

4,336,600,000 

4,368,600,000 

4,085,000,000 

4,268,800,000 

4,251,100,000 

4,216,000,000 

4,652,200,000 

5,177,600,000 

5,657,500,000 

6,425,200,000 

7,189,000,000 

7,738,900,000 

7,982,000,000 

9,027,200,000 

9,893,700,000 

10,763,900,000 

10,438,000,000 

11,373,200,000 

12,521,800,000 

13,046,400,000 

13,954,000,000 

14,626,700,000 

15,339,477,000 

15,758,700,000 

17,811,600,000 

20,594,228,000 

22,514,602,000 

25,301,377,000* 

31,256,147,000* 

28,932,011,000* 

27,860,443,000* 


Resources 


$1,126,500,000 

1,476,400,000 

1,494,100,000 

1,572,200,000 

1,564,200,000 

1,510,700,000 

1,730,600,000 

1,700,800,000 

2,731,300,000 

2,890,400,000 

3,204,600,000 

3,183,100,000 

3,204,100,000 

3,080,600,000 

3,212,600,000 

3,399,000,000 

3,869,100,000 

4,031,100,000 

4,208,000,000 

4,221,300,000 

4,426,900,000 

4,521,500,000 

5,203,700,000 

5,470,400,000 

5,940,900,000 

6,343,000,000 

6,562,100,000 

7,245,300,000 

7,192,300,000 

7,290,600,000 

7,609,600,000 

7,533,900,000 

7,822,100,000 

8,609,000,000 

9,904,900,000 

10,785,900,000 

12,357,500,000 

13,363,900,000 

14,303,100,000 

15,198,800,000 

16,918,200,000 

18,147,600,000 

19,645,000,000 

19,583,400,000 

21,095,000,000 

22,450,300,000 

23,631,000,000 

24,987,000,000 

25,712,100,000 

26,971,398,000 

27,804,100,000 

32,271,200,000 

37,126,763,000 

40,726,438,000 

47,615,447,000 

53,079,108,000 

49,671,390,000 

50,425,367,000 


Ratio of Loans 

Loans and 

Ratio 

of Loans and 

to Resources 

Investments 

Inv. to Res. 

32.17 

$766,700,000 

68.06 

37.27 

1,015,600,000 

68.79 

39.38 

1,031,600,000 

69.04 

41.70 

1,096,200,000 

69.73 

43.94 

1,100,900,000 

70.38 

47.61 

1,125,400,000 

74.49 

45.61 

1,209,300,000 

69.88 

49.21 

1,302,700,000 

73.57 

52.71 

2,153,100,000 

78.83 

54.13 

2,287,700,000 

79.15 

54.55 

2,541,200,000 

79.29 

53.94 

2,534,400,000 

79.62 

53.68 

2,562,100,000 

79.96 

50.68 

2,427,100,000 

78.78 

46.92 

2,539,300,000 

79.04 

48.90 

2,562,700,000 

73.39 

49.16 

2,902,800,000 

75.02 

50.86 

3,099,400,000 

76.88 

53.08 

3,084,800,000 

73.31 

53.55 

3,291,100,000 

77.96 

51.33 

3,224,300,000 

72.83 

54.33 

3,487,800,000 

77.13 

56.59 

3,944,800,000 

75.80 

57.78 

4,273,200,000 

78.11 

58.49 

4,587,100,000 

77.21 

60.57 

5,000,100,000 

78.83 

60.44 

5,008,400,000 

76.32 

59.85 

5,606,000,000 

77.37 

60.74 

5,722,700,000 

79.56 

56.03 

5,530,300,000 

75.85 

56.09 

5,834,000,000 

76.66 

56.28 

5,925,500,000 

78.44 

53.89 

5,948,300,000 

76.04 

54.04 

6,511,900,000 

75.64 

52.27 

7,356,600,000 

74.26 

52.45 

8,055,800,000 

74.69 

52.00 

9,246,400,000 

74.82 

53.80 

10,228,400,000 

76.54 

54.11 

11,139,000,000 

77.87 

52.52 

11,636,200,000 

76.56 

53.36 

13,015,100,000 

76.91 

54.52 

13,967,200,000 

76.96 

54.79 

15,141,000,000 

77.07 

52.27 

14,883,900,000 

76.00 

53.91 

15,987,600,000 

75.78 

55.78 

17,245,200,000 

76.82 

55.21 

18,098,300,000 

76.59 

55.84 

19,312,489,000 

77.29 

56.89 

20,033,900,000 

77.92 

56.89 

20,924,402,000 

77.58 

56.68 

21,640,600,000 

77.84 

55.19 

24,646,400,000 

76.37 

55.47 

28,645,247,000 

77.15 

55.28 

32,316,590,000 

79.35 

53.14 

37,625,198,000 

79.02 

58.89 

42,752,858,000 

80.55 

58.25 

40,395,783,000 

81.16 

55.25 

40,482,610,000 

80.25 


* 7~ ? u , mber ,°f national banks only, number of state, etc., not reported. 

Includes rediscounts, acceptances, and interest earned but not collected by national banks. 








BANK LOANS 


281 


(2) With a given ratio vf loans to resources, condi¬ 
tions become more critical as the proportion of invest¬ 
ments to resources increases, and conditions improve 
as the proportion of investments to resources decreases. 

In other words, provided a constant relation ex¬ 
ists between the funds loaned and the total re¬ 
sources, the general banking situation is strength¬ 
ened whenever a bank disposes of long term bonds 
and reinvests the money in high grade commercial 
paper; conversely the general banking situation is 
weakened whenever a bank purchases long term 
bonds with money received from deposits or from 
the payment of high grade commercial paper. 
Therefore, anyone studying these conditions should 
note two things: 

(1) Whether the proportion of “ Loans ” to 
“ Resources ” is increasing, decreasing, or remaining 
fixed. 

(2) Whether the proportion of “ Investments ” 
to “ Resources ” is increasing, decreasing, or re¬ 
maining fixed. 

Although the most careful students consider these 
terms separately, we think it is generally safe to 
combine the two ideas in the one general rule, as 
follows: 

As the ratio of “ Loans and Investments ” to “ Ag¬ 
gregate Resources ” increases, the banking situation 
becomes more critical; and as the ratio of the two 
combined items to “ Aggregate Resources ” decreases, 
the banking situation improves. 

The accompanying table shows the record of the 
national, state and private banks and trust com- 


282 


BUSINESS BAROMETERS 


panies of the United States which have reported to 
the Comptroller since 1865. A study of these 
figures, with the other subjects, would have made 
it possible to forecast nearly every period of depres¬ 
sion and every period of over-expansion which this 
country has experienced since the Civil War. 
These figures cannot be expected to fortetell the ex¬ 
act time when crises or panics will occur, owing to 
sudden catastrophes, but they forecast the large 
swings. They clearly show when conditions are be¬ 
coming abnormal and expansion is going too far. 
These figures date back only to the Civil War, as 
the system of national banks was not established 
until 1863. Consequently, this is the only period 
which gives satisfactory data to form a basis for any 
theory regarding the relation of banking conditions 
to general business, and conversely, the effect of 
business conditions upon banking conditions. The 
latter clause is added because, although strained 
banking conditions cause a recession in general 
business, it has always been found true that great 
activity in business has caused strained banking- 
conditions. 

Therefore, when business has been very active 
and the country very prosperous, bankers may 
surely anticipate strained and critical banking con¬ 
ditions. Conversely when strained banking condi¬ 
tions have existed for a certain period, business men 
may be sure of a reaction. The figures show that 
after a period during which there was a more or less 
noticeably rapid increase in the ratio of “ Loans and 
Investments ” to “ Resources,” there followed in- 


BANK LOANS 


283 


variably a period of depression until the ratio was 
reduced to a normal point. From 1887 to 1897 the 
“ Loans and Discounts ” increased only 43% and 
the “ Investments ” 73% against an increase in 
aggregate resources of 50%. This was a normal 
and healthy increase and all observers were sure 
that the country was preparing for a period of 
marked expansion, but between 1897 and 1907 the 
“ Loans and Discounts ” increased 155% and the 
“ Investments ” 153% against the increase in “ Rer 
sources ” of 151%. It was due to these figures that 
the bankers and investors who carefully study all 
fundamental statistics were sure that the country 
was entering a period of decline. Such figures 
showed a period of depression to be absolutely nec¬ 
essary in order to give the banks an opportunity 
to recuperate and again enjoy healthy and normal 
conditions. These figures are still more dangerous 
when it is considered that during the period be¬ 
tween 1887 and 1897 the aggregate “ Resources ” 
showed an increase of 50%, even though the market 
value of securities was not increasing. 

During the ten years between 1897 and 1907, the 
increase in aggregate “ Resources ” was largely due 
to the inflated prices and the growing market value 
of securities held, and possibly not at all to larger 
numbers of investments. These changes, it is true, 
have been irregular rather than constant and have 
caused varying conditions of strength and weakness 
in the banking situation; but the figures plainly in¬ 
dicate that in 1906 banks were in a very weak con¬ 
dition with their investments over-extended. The 


284 


BUSINESS BAROMETERS 


above figures would appear somewhat different if 
figures of all private banking houses, such as J. P. 
Morgan & Co., Kuhn, Loeb & Co., and others were 
included, but nevertheless they are sufficient. 

Referring to earlier years, we see that in 1873 the 
ratio of “ Loans ” to “ Resources ” first exceeded 
50% and in fact reached a ratio of 52.71%. Conse¬ 
quently, a panic occurred,in that year. The ratio 
of “ Loans ” to “ Resources ” continued to increase 
to 54.13% and 54.55% in 1874 and 1875 respec¬ 
tively, and the prolonged depression was probably 
due to this continued increase. Moreover, this 
item remained practically unchanged until 1879 
when the liquidation was completed. “ Loans and 
Discounts/’ which in 1873 were $1,439,900,000, 
after reaching $1,748,100,000 in 1875, were reduced 
in 1879 to $1,507,400,000. This condition of the 
banks enabled them to loan money at low rates of 
interest and again accommodate legitimate enter¬ 
prises. Consequently, business increased marvel¬ 
ously from 1879 to 1883. 

During this period, however, loans had again 
rapidly advanced,— as is shown by the table,— and 
remained practically fixed between 1883 and 1885. 
During this period, that is in 1884, a sharp panic 
occurred which might readily have been antici¬ 
pated. Although distress was felt in every part of 
the United States, it lasted only a short time in 
comparison with that of 1873. The banks were 
able to reduce their ratio of “ Loans and Invest¬ 
ments ” to “ Resources ” so quickly that the ratio 
which stood at 77.96% in 1884 was reduced to 


BANK LOANS 


285 


72.83% in 1885. Consequently, business became 
again more active, mills resumed operation and 
railroad earnings began to increase. 

In 1886, the new period of over-expansion, with 
advancing prices, was in full swing. This move¬ 
ment continued without any marked change until 
the early nineties when u Loans n reached a very 
high proportion, 60.57%.: Large crops in this 
country, with small crops abroad, helped to post¬ 
pone trouble for a time, but a depression came in 
1893 when the ratio of “ Loans ” to “ Resources ” 
was even higher than in 1890, namely 60.74%. All 
business men and investors who were then studying 
these figures were absolutely sure that a panic 
would ensue. 

Another disturbance came in 1903 which, al¬ 
though short, was certainly severe. Railroad earn¬ 
ings decreased, mills shut down, many men were 
thrown out of employment and money rates were 
very high. Again the western farmer came to the 
rescue of the country, and owing to bountiful crops 
and other reasons, mills again started and business 
improved. This continued until 1907. During 
these years, however, there was no real improve¬ 
ment in the banking situation except for a short 
time. In 1904, money was very cheap, but only 
temporarily. Banking conditions became worse 
and worse so that students of the situation were 
sure that the improvement from 1904 to 1906 
would be followed by a depression in 1907 when 
the banks might again have an opportunity to 
recuperate. This recuperation was completed in 


286 


BUSINESS BAROMETERS 


1908, and very soon banking conditions were again 
normal. In 1914 the Federal Reserve Banking 
System went into force — of this we treat in detail 
on later pages. 

The great value of this data to the investor is 
self-evident. When the ratio of “ Loans and In¬ 
vestments ” to “ Resources ” is abnormally high, 
the country is abounding in a false prosperity and 
securities are selling at high prices, the wise investor 
sells his securities and places his money on deposit 
in strong banks. On the other hand, when the 
ratio of “ Loans and Investments ” to “ Re¬ 
sources ”* is low, and when, although business is 
dull and mills are not running, his general knowl¬ 
edge of the situation shows that fundamental con¬ 
ditions are sound, the investor will withdraw his 
money from the banks, purchase high grade stocks 
and bonds and hold them until business again 
becomes active. 

While in the previous table we have given aggre¬ 
gate figures for all banks, in order to show general 
banking conditions, such figures are also of service 
relative to the condition of two or more banks. A 
depositor should select a bank whose ratio of 
“ Loans ” to “ Resources ” is comparatively small 
and should especially avoid banks with large 
“ Investment ” accounts,— so large as to show a 
policy not in agreement with sound management. 

A very small figure for “ Loans ” is not a good 
sign, neither is a very large figure. The former 

* Some prefer to substitute “ Deposits ” in place of “ Resources,” and in 
that way check their conclusions, as the “ Loans ” should not much exceed 
the ** Deposits.” 


BANK LOANS 


287 


signifies stagnation, the latter over-extension. It is 
important that the figure he normal, and that it hear 
a proper relation to the figure for “Deposits,” — 
thus giving a sound, safe amount for “ Reserve.” 
See also the discussion of the Federal Reserve law, 
page 306. 

The following conclusions regarding the ratio of 
“ Loans ” to “ Aggregate Resources ” are suggested. 
The same principles apply to the ratio of “ Loans 
and Investments ” to “ Aggregate Resources.” 

1 . During a Period of Business Depression. 

(a) An increase in the ratio signifies renewed 
activity. 

(b) A decrease signifies a further recession in 
business. 

(c) No change signifies continued dullness. 

2 . During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase in the ratio signifies increased 
activity. 

(b) A decrease signifies a temporary recession v 

(c) No change calls for special watchfulness, 

3 . During a Period of Over-expansion. 

(a) An increase in the ratio signifies that 
fundamental conditions are becoming unsound. 

(b) A decrease tends to prolong the period of 
over-expansion. 

(c) No change signifies nothing of importance. 


288 


BUSINESS BAROMETERS 


4. During a Period of Decline Following a Period 
of Over-expansion. 

(a) An increase in the ratio signifies further 
trouble. 

(b) A decrease is the natural movement. 

(c) No change calls for special watchfulness. 

SURPLUS RESERVES OF THE BANKS 

The figure for “ Surplus Reserve ” often indi¬ 
cates : 

(a) The Price of Money. 

(b) The Supply of Money. 

The price is determined by the relation of the 
supply and the demand; that is, when more persons 
wish to borrow than to loan, interest rates advance; 
and when a larger number wish to loan than to 
borrow, the supply is greater than the demand and 
interest rates decline. For this reason, money 
rates are usually high during the periods of business 
activity and low during periods of depression. The 
price of money, however, is not as important a 
factor as the supply. In other words, provided the 
merchant can obtain the money when needed and 
in sufficient quantities, an abnormal interest rate is 
less harmful in its effects than the inability to get 
money at all. 

A variation in the rates for borrowed money has 
a more direct effect upon the market for stocks and 
bonds than upon the market for merchandise. 
When the speculator can borrow money at three or 


BANK RESERVES 


289 


four per cent to purchase securities paying five or 
six per cent, the temptation is to borrow and make 
the purchases, thus increasing the demand and con¬ 
sequently the market price for the securities. 
Under such circumstances, there is a profit on the 
“ interest account,” even though there is no in¬ 
crease in the value of the investments. On the 
other hand, this increased incentive to purchase 
does not exist when money commands six or seven 
per cent and securities are selling on a four or five 
per cent basis, for then the “ interest account ” 
shows a loss. Those who have securities upon 
which they are borrowing money are tempted to 
sell them in order to stop the loss in interest. Con¬ 
sequently, the supply of securities exceeds the de¬ 
mand and the price declines. * 

As previously stated, this question of “ interest 
rates ” is entirely secondary to the question of 
“ supply.” It is not interest rates that cause the 
merchant to fail or the speculator to sacrifice his 
stocks, but rather his inability to renew his loans on 
any terms whatever. Many great periods of de¬ 
clining prices have been solely due to this cause, 
namely, a lack of supply of money, and the specu¬ 
lator is not the only one to feel the effect of such 
times. The weekly statement of reporting member 
banks, used in connection with the Federal Reserve 
bank statement, Comptroller’s Reports and Foreign 
Money Rates, forms the best barometer of the sup¬ 
ply of money. Previous to the Federal Reserve 
system the statement of the New York Clearing 
House Banks was the best barometer. 


290 


BUSINESS BAROMETERS 


As to the current price of money, this may be 
definitely determined each day by referring to the 
money articles on the financial page of most daily 
papers. The figures under what is known as “ call 
rates ” or “ call money ” denote the rates which the 
stock exchange houses and bond dealers are re¬ 
quired to pay for money on loans which may be 
called any day and on which the rates may change 
from day to day. Sometimes this figure is more 
and sometimes less than the figure for “ time rates.” 
“ Time rates ” apply to loans maturing at a fixed 
date, such as six months or a year. When the 
bankers having money to loan think that all rates 
are to strengthen in the near future, then the call 
rate is less than the time rate, and when the bankers 
having money to loan think that all rates are to 
decrease in the immediate future, then call rates 
are higher than the time rates. Some of the 
shrewdest borrowers take time money when the 
bankers are encouraging the people to take call 
money, and vice versa, on the principle that the 
bankers know more about the situation than their 
customers. However, this question of money rates 
is too complicated to present here in detail, espe¬ 
cially since as has been stated, the price of money 
can be easily ascertained at any time by referring 
to the daily papers. 

The supply of money is the most vital question 
as, unlike the price, it is not so subject to manipu¬ 
lation. This supply, as above stated, was formerly 
best indicated by the weekly New York Bank State¬ 
ment. This was simply a statement of the New 


BANK RESERVES 


291 


York banks and did not include statements from 
any of the other twenty thousand banks in the 
United States; nor the great banking institutions of 
foreign countries. We now have what is in the 
way of becoming a complete weekly bank state¬ 
ment. It now includes the statements of about 
eight hundred of the principal member banks of 
the Federal Reserve System. From this state¬ 
ment, together with the statement of the twelve 
Federal Reserve Banks, we can note weekly the 
amount of available money and follow closely the 
expansion or contraction of credits, as shown by 
the relation between reserves and deposits, and 
between reserves and loans. 

So long as the “ Surplus Reserve ” decreases, a 
corresponding increase in money rates may be ex¬ 
pected; but if the “Surplus Reserve” increases 
each week, a decrease in money rates may follow. 
Since the demand for stocks often increases as the 
interest rate decreases, money and the stock market 
often strengthen with the publication of what is 
known as a “ good bank statement,” namely, a 
bank statement which shows an increase in the 
“ Reserve Item.” On the other hand, as an in¬ 
crease in money rates often forces a sale of stocks, 
due to the calling of the loans, a “ poor bank state¬ 
ment ” is often followed by a drop in the market 
prices. When the bank statement is published 
on Saturday, the change in interest rates may not 
come until the following Monday, or possibly later, 
but the speculator anticipates this by buying or 
selling on Saturday. The first sellers after a poor 


292 


BUSINESS BAROMETERS 


bank statement are supposed to obtain the best 
prices, and the first buyers after a very good bank 
statement are supposed to obtain their securities 
at the lowest prices. 

The following conclusions are suggested relative 
to the ratio of reserves to deposits. In interpret¬ 
ing “ Reserve Ratios ” account must be taken of 
abnormal gold holdings such as those built up dur¬ 
ing 1921 and 1922. The ratio is of greatest im¬ 
portance in times of marked strain. 

1. During a Period of Business Depression. 

(a) An increase signifies lower money rates 
but continued dullness. 

(b) A decrease signifies higher money rates 
but improved conditions. 

(c) No change signifies continued dullness. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies that the recovery in 
business is not very marked, and that continued 
low money rates may be expected. 

(b) A decrease signifies continued improve¬ 
ment and is the forerunner of higher money rates. 

(c) No change signifies uncertainty. 

3. During a Period of Over-expansion. 

(a) A great increase signifies that prosperous 
conditions may be expected to continue, with no 
change in money rates. 


WORLD MONEY RATES 

during the following panic years 



Frjm the Walt Street journal 


This chart shows the course of money in the years following four severe panics: 1857, 1866, 
1873, 1907. Each square represents one percent vertically, and one month horizontally. The 
figures at the side indicate the minimum discount rate of the Bank of England. The left twelve 
squares of the chart represent the months of the year; those at the right the year following the 
panic. 




























































BANK RESERVES 


293 


(b) A great decrease is a danger signal and 
is always the forerunner of higher money rates. 

(c) No change may signify either condition. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase tends to prolong present 
conditions and to lower money rates. 

(b) A decrease is a sign that conditions are 
growing worse. Higher money rates may be ex¬ 
pected. 

(c) No change signifies uncertainty. 

Before the enactment of the Federal Reserve 
Banking Act a large part of the reserves of national 
banks was kept either on deposit in Reserve Cities 
or in cash. The banks in reserve cities, in turn kept 
their reserves partly in cash and partly in demand 
deposits in central reserve cities especially New 
York. Hence the ratio between cash in the banks 
and “ Deposits ” and between cash and “ Re¬ 
sources ” was of great importance for judging the 
banking situation. 

The surplus cash always tended to gravitate to 
New York where it was employed partly in com¬ 
mercial loans. But chiefly these funds were loaned 
on stock exchange collateral for financing stock 
speculation. Any financial disturbance or any 
great general demand for money which causes the 
withdrawal of funds by the depositing banks in 
other sections, had a cumulative effect on the cash 
held by the New York banks. Hence the ratio be¬ 
tween cash and resources and between cash and 


294 


BUSINESS BAROMETERS 


deposits of the New York banks in years past has 
always been an especially good indicator. 

Under the Federal Reserve System, however, the 
banks which are members of the system now have 
to carry all of their legal reserves with the Federal 
Reserve Bank in their respective districts. To 
some extent country banks still deposit funds in 
New York, but as such deposits cannot be counted 
as legal reserves, they are not nearly as large as 
formerly. The Federal Reserve Banks have the 
authority to transfer funds between themselves in 
case of distress in any particular locality. 

Having already explained the relation that 
“ Loans and Investments ” bear to the money 
situation, let us study the effect that “ Reserves ” 
has on the money situation. Of course, it is 
usually true that the greater the amount of “ Loans 
and Investments,” the smaller the amount of 
“ Reserves ” and vice versa. For this reason the 
following rule is already self-evident. 

The hanking situation grows more critical as the 
ratio of reserves to deposits decreases, and the situation 
improves as the ratio of reserves to deposits increases. 

National banks are now compelled by law to 
maintain a reserve on deposit with the Federal 
Reserve Banks equal to from 7% to 13% of their 
demand deposits (according to the city in which 
the bank is located) and 3% of their short time 
deposits running over 30 days and any amount 
over this required reserve is called a “ Surplus Re¬ 
serve.” As this surplus reserve declines, money 
rates increase, merchants and manufacturers are 


BANK RESERVES 


295 


limited in borrowing, and speculators are compelled 
to dispose of stocks and bonds in order to pay 
their loans. On the contrary, as the surplus re¬ 
serve increases the banks become sounder and are 
ready to loan money to investors, manufacturers, 
and merchants at lower rates of interest. This sub¬ 
ject is explained more in detail a few pages hence. 

Periods of depression and over-expansion in the 
past often could have been anticipated by a study 
of the ratio of “ Cash ” to “ Deposits,” since under 
the old National banking act reserves were held 
wholly in cash by the New York banks, while 
country banks carried 40% of their reserves in 
cash. Whenever a great decline in the ratio of 
cash to deposits or aggregate resources occurred 
there always followed a period of contraction of 
credits; and conversely as this ratio increased 
lower interest rates have always followed. The 
following table shows the ratio of cash to the de¬ 
posits of the National, State, Savings and other 
banks and trust companies from 1865 to date. 
Beginning with the year 1917 the figures for 
Reserves have been substituted for cash, owing to 
change above described. 


Ratio of 
Cash to 



No. of Banks 

Individual 

Total Cash in 

Individual 

Year 

Reporting 

Deposits 

Banks 

Deposits 

1865 

1,960 

$ 641 , 000,000 

$ 199 , 400,000 

31.11 

1866 

2,267 

815 , 800,000 

231 , 900,000 

28.30 

1867 

2,279 

876 , 600,000 

205 , 600,000 

23.45 

1868 

2,293 

968 , 600,000 

200 , 700,000 

20.72 

1869 

2,354 

1 , 032 , 000,000 

162 , 500,000 

15.74 

1870 

2,457 

1 , 051 , 300,000 

187 , 700,000 

17.85 

1871 

2,796 

1 , 251 , 600,000 

194 , 000,000 

15.50 

1872 

3,066 

1 , 353 , 800,000 

177 , 600,000 

13.12 


296 


BUSINESS BAROMETERS 


Ratio of 
Cash to 



No. of Banks 

Individual 

Total Cash in 

Individual 

Year 

Reporting 

Deposits 

Banks 

Deposits 

1873 

1,968 

$1,421,200,000 

$218,200,000 

15.35 

1874 

1,983 

1,526,500,000 

252,200,000 

16.52 

1875 

3,336 

1,787,000,000 

238,700,000 

13.36 

1876 

3,448 

1,778,600,000 

226,400,000 

12.73 

1877 

3,384 

1,813,600,000 

230,500,000 

12.71 

1878 

3,229 

1,717,400,000 

214,600,000 

12.50 

1879 

3,335 

1,694,200,000 

216,300,000 

12.77 

1880 

3,355 

1,951,600,000 

285,500,000 

14.63 

1881 

3,427 

2,296,800,000 

295,000,000 

12.84 

1882 

3,572 

2,460,100,000 

287,100,000 

11.65 

1883 

3,835 

2,568,400,000 

321,000,000 

12.50 

1884 

4,111 

2,566,400,000 

321,200,000 

12.51 

1885 

4,350 

2,734,300,000 

414,300,000 

15.15 

1886 

4,378 

2,812,000,000 

375,500,000 

13.00 

1887 

6,179 

3,308,200,000 

432,800,000 

13.09 

1888 

6,647 

3,422,700,000 

446,100,000 

13.03 

1889 

7,203 

3,778,100,000 

499,100,000 

13.21 

1890 

7,999 

4,062,500,000 

478,300,000 

11.77 

1891 

8,641 

4,796,800,000 

479,100,000 

11.41 

1892 

9,338 

4,664,900,000 

568,400,000 

12.58 

1893 

9,492 

4,627,300,000 

515,900,000 

11.15 

1894 

9,509 

4,651,200,000 

688,900,000 

14.81 

1895 

9,818 

4,921,300,000 

631,100,000 

12.82 

1896 

9,469 

4,945,100,000 

531,800,000 

10.84 

1897 

9,457 

5,094,700,000 

628,200,000 

12.33 

1898 

9,485 

5,688,200,000 

687,800,000 

12.09 

1899 

9,732 

6,768,700,000 

723,300,000 

10.69 

1900 

10,382 

7,238,900,000 

749,900,000 

10.36 

1901 

11,406 

8,460,600,000 

807,500,000 

9.54 

1902 

12,424 

9,104,700,000 

848,100,000 

9.31 

1903 

13,684 

9,553,600,000 

757,200,000 

8.97 

1904 

14,850 

10,000,500,000 

990,600,000 

9.90 

1905 

16,410 

11,350,700,000 

994,100,000 

8.76 

1906 

17,905 

12,215,800,000 

1,016,400,000 

8.32 

1907 

19,746 

13,099,600,000 

1,113,700,000 

8.51 

1908 

21,246 

12,784,511,169 

1,368,300,000 

10.70 

1909 

22,491 

14,035,500,000 

1,452,000,000 

10.34 

1910 

23,095 

15,283,400,000 

1,423,800,000 

9.32 

1911 

24,392 

15,906,300,000 

1,554,200,000 

9.77 

1912 

25,195 

17,024,067,607 

1,572,953,479 

9.24 

1913 

25,993 

17,501,006,000 

1,560,709,447 

8.92 

1914 

26,765 

18,557,978,467 

1,639,219,163 

8.83 

1915 

27,062 

19,195,151,304 

1,457,702,138 

7.59 

1916 

27,513 

22,844,801,601 

1,486,118,322 

6.51 


BANK RESERVES 


297 



No. of Banks 

Individual 


Ratio 

Reserves to 

Year 

Reporting* 

Deposits 

Reserves 

Deposits 

1917 

7,604 

$ 6 , 709 , 203,000 

$ 1 , 046 , 102,000 

15.59 

1918 

7,705 

7 , 341 , 453,000 

1 , 129 , 557,000 

15.39 

1919 

7,785 

8 , 697 , 663,000 

1 , 208 , 969,000 

13.81 

1920 

8,030 

9 , 822 , 914,000 

1 , 245 , 233,000 

12.68 

1921 

8,154 

8 , 419 , 411,000 

1 , 040 , 205,000 

12.35 

1922 

8,249 

8 , 504 , 104,000 

1 , 151 , 605,000 

13.54 


The following conclusions relative to the ratio of 
either cash or reserves to deposits are suggested: 

(These general principles also apply to the ratio 
of “ Reserves ” to “ Aggregate Resources.”) 

1. During a Period of Business Depression. 

(a) After money has been cheap for some 
time, accompanied by large reserves figures, a con¬ 
tinued increase in the ratio of “ Reserves ” to “ De¬ 
posits ” signifies that business remains at a stand¬ 
still. 

(b) A decrease — under the above conditions 
— may be a good sign, showing that business is 
reviving. 

(c) No change signifies that conditions are 
stationary. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) After money rates have been very low for 
some time, a further increase in the ratio of “ Re¬ 
serves ” to “ Deposits ” often means that there has 
been another recession in business. 

(b) A decrease under such conditions usually 
signifies renewed activity. 

(c) No change signifies a period of hesitation. 

* For National Banks only, whereas table above applies to all banks. 
Figures as of June report or thereabouts. 


298 


BUSINESS BAROMETERS 


3. During a Period of Over-expansion. 

(a) An increase in the ratio of “ Reserves ” to 
“ Deposits ” tends to prolong the period of over¬ 
expansion. 

(b) A decrease tends to shorten the period of 
over-expansion. 

(c) No change signifies a period of hesitation. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase in the ratio of “ Reserves ” 
tends to delay the depression. 

The present banking law has changed the reserve 
requirements and the method of handling these 
reserves so as to deprive these subjects of some of 
the importance they formerly possessed. Under 
the present system the member banks are required 
to keep reserves as follows: 

1. “ Country ” banks — not less than 7% of the 
aggregate amount of its net demand deposits and 
3% of its time deposits. 

2. If in a reserve city a.net balance not less than 
10% of its net demand deposits and 3% of its 
time deposits. 

3. If in a central reserve city, a net balance equal 
to not less than 13% of net demand deposits and 
3% of time deposits. 

It is provided in every case that the amount of 
required reserve shall be kept as a balance to the 
credit of the member bank in the Federal Reserve 
Bank of its district. 


BANK DEPOSITS 


299 


Beside this reserve kept in the Federal Reserve 
Bank, it is obvious that any bank must keep a fund 
of cash on hand as “ till-money ” to meet the daily 
demands of its business. Experience has shown 
that about 3% or 4% of the deposits is ordinarily 
a safe amount for this purpose for the country as 
a whole, while large city banks need only about 
2%. With the growth of the “ checking habit ” 
the amount of till-money required is steadily de¬ 
clining. Some of the importance formerly pos¬ 
sessed by the relation between cash and deposits, 
and cash and resources of the national banks now 
attaches to these items in the combined statement 
of the twelve Federal Reserve Banks. 

DEPOSITS OF THE BANKS 

The rule governing the ratio of “ Reserves ” to 
“ Deposits ” holds good, except when deposits are 
increasing too rapidly, owing to increased prices of 
securities, real estate and commodities. Besides 
studying the ratio which we have described, the 
deposits should be watched independently for 
changes, as deposits should not increase too rapidly. 
The weekly statement of the New York banks will 
serve this purpose. A very simple illustration 
shows how large deposits may be reported at con¬ 
siderable risk, but without any intentional mis¬ 
statement of facts. 

A few years ago a miser died in a certain town, 
which may be called Graniteville. The executor 
of his estate found $5,000 in gold stored away in the 


300 


BUSINESS BAROMETERS 


house, and deposited it with the Graniteville Trust 
Company, thereby increasing the deposits of that 
company by $5,000. Shortly after, John Smith 
borrowed of the trust company $4,500 of the 
amount deposited in order to buy stone with which 
to build a block of buildings. The local granite 
company, having outside income sufficient to pay 
its operating expenses, deposited the entire $4,500 
received from Smith with the Graniteville Trust 
Company; so the deposits of the trust company 
became $9,500 greater. Soon after, 'Mr. Jones 
came into the bank and borrowed $4,200 with 
which to buy stone to build a block in another part 
of the town, and upon receipt from the granite 
company of Jones’ $4,200 the granite company 
made another deposit with the trust company, in¬ 
creasing the deposits to $13,700. 

The following day a Mr. Brown, by means of a 
loan from the trust company, bought stone, and the 
granite company further increased its deposits to 
$17,500. This same method of procedure was con¬ 
tinued until the $5,000 in gold which was originally 
deposited resulted in increasing the deposits of the 
trust company by $50,000 and the loans by $45,000. 
Moreover, this $5,000 enabled the granite company 
to suppose it had $45,000 in cash on deposit in the 
trust company, and provided for the building of 
several stone blocks in the city. In other words, 
the deposit of this $5,000 in gold resulted in creating 
an apparent wealth in Graniteville of about $100,- 
000. This story shows not only the risks of great 
increases in “ deposits,” but also the importance of 


BANK DEPOSITS 


301 


gold importations in times of stringency, owing to 
the advantage of having on hand as much currency 
as possible. 

When the miser’s estate was settled, this $5,000 
was turned over to his only daughter, who had the 
same hoarding disposition as her father. She im¬ 
mediately withdrew in gold the $5,000 from the 
Graniteville Trust Company and placed the same 
in a safe deposit box with the following result. The 
Graniteville Trust Company, in order to show its 
proper “ Reserve,” was obliged to demand payment 
of all the loans made to Smith, Jones, Brown, and 
the other men. In order to pay these loans, all of 
these men were obliged to sell the buildings which 
they had erected and, in order to protect the price 
of granite, the granite company was obliged to pur¬ 
chase these buildings, which necessitated the with¬ 
drawal of their deposits from the trust company. 
Thus the withdrawal of this $5,000 in gold resulted 
in a $50,000 decrease in the deposits of the trust 
company, caused the $45,000 of cash assets of the 
granite company to vanish,' and caused half a 
dozen or more citizens to lose their property, and 
possibly enter bankruptcy. 

The principle should be clearly kept in mind 
when studying the “ Deposit ” item of the bank 
statement. Large “ Deposits ” are not necessarily 
a healthy sign. Neither very large nor very small 
“ Deposits ” are normal. The best bank statement 
is the one where the figures for “ Deposits ” are 
normal and bear a proper relation to “ Loans,” 
thus showing a proper “ Surplus Reserve.” 


302 BUSINESS BAROMETERS 

MEMBER BANK STATEMENTS 
Since the inauguration of the Federal Reserve 
System the plan of bank statements has been 
very much improved. The following is a table 
of the items upon which a representative number 
of certain member banks report each week. The 
statement shows the condition on July 25, 1923. 
Although only about 800 out of 9,600 member 
banks report for this statement, they are the larger 
banks and represent approximately 80% of the 
total reserve of the Federal Reserve members. 


Number of reporting banks.772 

Loans secured by U. S. Gov’t obligations.. . . $231,407,000 

Loans secured by other Stocks and Bonds. .. 3,741,557,000 

All other Loans and Discounts. 7,742,762,000 

Total Loans and Discounts. 11,715,726,000 

U. S. Securities owned. 2,443,221,000 

Other Securities owned. 2,185,085,000 

Total Loans, Discounts and Investments .. . 16,344,032,000 

Reserve with Federal Reserve Banks. 1,355,902,000 

Cash in Vault. 282,945,000 

Net Demand Deposits. 11,077,870,000 

Time Deposits. 3,964,432,000 

Government Deposits. 145,920,000 

Bills payable and rediscounts with the Federal 
Reserve Banks.. . 255,449,000 


Explaining the items in the order in which they 
are given: 

The loan items are highly important. Loans 
are divided into three classes, according to the 
nature of their security. (1) Loans secured by 
United States war obligations show the amount of 
war paper including refunding issues of notes and 
bonds still held by the banks. (2) Loans secured 
by other stocks and bonds reflect the trend of fi¬ 
nancing in the security markets. (3) “ All Other 













BANK STATEMENTS 


303 


Loans and Discounts ” represent very largely com¬ 
mercial accommodations. 

u United States Securities Owned ” represent pri¬ 
marily Liberty Bonds and certificates of indebted¬ 
ness. 

“ Other Securities Owned ” represent the invest¬ 
ments of the banks other than U. S. Government 
securities. 

“ Total Loans, Discounts and Investments ” are 
the total of the five items given above and also 
include all bills rediscounted with the Federal Re¬ 
serve Bank and discounted bills. 

“ Reserve Balances with Federal Reserve 
Banks: ” As explained in the preceding pages, 
only reserves which are held with the Federal Re¬ 
serve Banks are counted in the members’ legal 
reserve. This item, together with the “ Cash in 
Vault,” represents the liquid resources of the bank. 
In calculating ratios between reserves and deposits 
or reserves and loans the reserve item should include 
cash in vault. 

“Net Demand Deposits ” represent deposits 
subject to check without notice, as contrasted 
against “ Time Deposits ” which are not subject to 
check.* For practical purposes, however, ratios 
between loans and deposits and reserves and de¬ 
posits can be calculated without considering “ time 
deposits,” except to set aside the 3% reserve against 
them. 

“ Time Deposits ” are more in the nature of 

♦Bankers in California and some other states allow limited checking 
privileges against savings or time deposits. 


304 


BUSINESS BAROMETERS 


deposits of a savings bank, the depositor being 
required to furnish 30 days’ notice before he can 
withdraw his funds. “ Government Deposits ” — 
still another classification — during the war as¬ 
sumed large proportions but have since declined 
and should fall off gradually as the government’s 
activity in rediscounting operations decreases. 

Bills payable and rediscounts with the Federal 
Reserve Bank, indicate the amount of indebted¬ 
ness which the member banks have with the 
Federal Reserve Bank and show the extent to 
which they have had to resort to the Federal Re¬ 
serve Banks for assistance. 

The item “loans and investments ” should be 
compared with the reserves of the member banks. 
Reserves should be compared with the net de¬ 
mand deposits of the member banks. These ratios 
have approximately the same meaning as the 
ratios of loans to cash and cash to deposits under 
the old banking system. 

* * * * 

THE COMPTROLLER’S REPORTS UNDER THE 
FEDERAL RESERVE SYSTEM 

In the items of the Comptroller’s Reports, which 
cover the whole country, certain changes have also 
occurred which students must take into account 
when comparing current figures with past figures. 
Loans have greatly increased. The reduction in 
reserve requirements theoretically released about 
$500,000,000 in cash, against which more than 
$2,000,000,000 in loans could be made which would 
not have been possible under the old system. The 


COMPTROLLER’S REPORT 


305 


importation of about $1,137,944,000 of gold in 1915 
and 1916 was also a strong factor for expansion in 
loans. Considering the change in the law and these 
gold imports, loans of the national banks during 
the first year and a half under the Federal Reserve 
system increased nearly $1,000,000,000 and war 
financing afterwards caused them to increase much 
further. 

“ Cash ” is much smaller. Whereas under the 
old system banks were required to hold 6%, 12 \% 
or 25% of their deposits in cash (according to the 
class of bank), they must, under the new system, 
hold only 7%, 10%, and 13% respectively of their 
demand deposits and 3% of their time deposits in 
the Federal Reserve Bank, and only such cash as 
till-money as the daily demands of business compel: 
about 3% or 4% or less. According to distribu¬ 
tion of deposits on October 31, 1914, therefore, the 
law authorizes an average reduction of about 8% 
in cash holdings, but bankers will probably not 
find it practicable or wise to hold so little cash on 
hand. However a large reduction in “ cash ” took 
place under the new system. 

“ Investments ” were not changed a great deal 
by the Federal Reserve system. While one of the 
chief aims of the system is to turn the banks from 
long term investments, such as bonds, etc. (which 
constitute “ Investments ”), to short term busi¬ 
ness paper, many banks continue to carry a “ back 
log ” of good bonds among their holdings. After 
the Federal Reserve Act went into effect a large 
amount of bond buying was carried out by all 


306 


BUSINESS BAROMETERS 


classes of banks, but this was not due (directly, at 
least,) to the change in system, but rather to the 
obligation laid upon the banks to help the govern¬ 
ment finance the war. The longer the war lasted 
the greater was the amount of government securi¬ 
ties that the banks were obliged to carry. This 
development has continued due to the increase in 
proportion of saving deposits. 

“ Aggregate resources ” were expanded on ac¬ 
count of the increase in the “ loans ” item. “ Sur¬ 
plus ” was not directly affected by the new system. 
The “ surplus ” of a bank, as in any other business 
concern, is the “ nest egg ” which it saves out of its 
earnings, and the earning capacity of the banks 
has not been greatly altered. Deposits of course 
are much larger. 

The above are simply suggestions as to the 
allowance which should be made for the effect of 
the Federal Reserve System. As the war greatly 
complicated the situation care must be taken, 
therefore, in comparing the current figures with 
figures previous to 1914. 

THE FEDERAL RESERVE BANK SYSTEM 

For many years it was evident that the banking 
system of the United States was inadequate to 
meet the great financial needs of the country, not 
only due to certain defects but because the former 
system lacked certain necessary provisions which 
go to make an efficient banking system. Although 
the present law embodies changes which are far 
reaching and of great importance, still its frame- 


FEDERAL RESERVE BANK SYSTEM 307 


work is for the most part that of the old banking 
system, the good features of which have almost 
without exception been retained. Briefly, the new 
system has five prime purposes which are named 
below, although it 1 also seeks to make many other 
important corrections. 

(1) The creation of a joint mechanism for the extension 
of credit to banks which possess sound assets (especially in 
times of emergency) and which desire to liquidate them for 
the purpose of meeting legitimate commercial, agricultural, 
and industrial demands on the part of their clientele. 

(2) The creation of an elastic currency which will con¬ 
tract and expand directly with the demands of business; also 
the ultimate retirement of the present bond-secured cur¬ 
rency, with suitable provisions for the fulfillment of govern¬ 
ment obligations to bondholders. 

(3) The establishment of a public discount market for 
commercial paper and a better market for farm land mort¬ 
gages which will furnish the merchant, the manufacturer 
and the farmer with better facilities with which to care' for 
their financial needs. 

(4) The provision for better extension of American banking 
facilities in foreign countries to the end that our trade abroad 
may be enlarged and that American business men in foreign 
countries may obtain the accommodations they require in 
the conduct of their operations. 

(5) To establish a more effective supervision of banking 
in the United States and to secure the co-operation of the 
nation’s banking power for the mutual protection and profit 
of the banks and the public. 

In each of the above aims is embodied the desire 
to utilize the credit of the country to its greatest 
extent, at the same time providing against danger¬ 
ous inflation. 

The greatest defect in the old system was in the 
matter of bank reserves. First, because of the lack 
of centralization of reserves which would combine 
the power of all the country’s banks to withstand 
the strain of financial crises. Hitherto each bank 


308 


BUSINESS BAROMETERS 


had been rather a unit in itself. By law it was 
required to reserve a certain percentage of its de¬ 
posits, part of which had to be held in its own 
vaults while the remainder could be deposited with 
banks of either of the three central reserve cities, 
New York, Chicago or St. Louis, and also in re¬ 
serve cities where it drew about 2% interest. This 
resulted in a large accumulation of funds in these 
cities, especially in New York where they were 
loaned to a large extent against stock exchange 
collateral. In case of sudden financial' stringency, 
the outside banks were unable to call in their re¬ 
serves because the central reserve city banks 
themselves could not liquidate their funds. 

The Federal Reserve system has attempted to 
correct this condition by providing a series of twelve 
great reservoirs, one reservoir for each district, 
from which the banks of that district can draw T in 
time of need. These reservoirs are called Federal 
Reserve Banks. In reality each reserve bank is 
an association in itself, having as members all of 
the national banks and any other banks which 
wish to join it. Instead of these member banks 
depositing a portion of their required reserves in 
New York, Chicago or St. Louis banks, they are 
required to carry them with their respective Fed¬ 
eral Reserve Bank. Instead of having to depend 
simply upon their reserve in an emergency, mem¬ 
ber banks can at once convert their commercial 
paper by having it rediscounted with the Federal 
Reserve Bank. The proceeds they may have 
credited to their accounts, thus creating a balance 


FEDERAL RESERVE ACT 

Enacted Dec. 23, 1913 


FEDERAL RESERVE BOARD-8 MEMBERS 

Secretary of Treasury —Chairman 


FEDERAL ADVISORY COUNCIL 
Composed of one representative from each 
Federal Reserve District. Meet at least 
4 times a year in Washington, D. C. To 
confer with Federal Reserve Board. To 
advise regarding general business conditions; 
to make recommendations on discount rates, 
rediscount business, note issues, purchase and 
sale of gold or securities, open market oper¬ 
ations, reserve conditions, and general affairs 
in reserve districts. 


POWERS OF 
FEDERAL RESERVE 
BOARD 

(See footnote No. 2) 


MEMBERS AND QUALIFICATIONS 


Secretary of Treasury ex-officio 
Comptroller of Currency “ 41 

latter to receive salary of $7,000 a year 
additional to salary as Comptroller. 


FEDERAL RESERVE BANKS 

Inaugurated Nov. 16, 1914 

Chartered for 20 years, unless sooner dissolved by Congress, or disfranchised for violation of law 

1. Boston 4. Cleveland 7. Chicago 10. Kansas City 

2. New York 5. Richmond 8. St. Louis 11. Dallas 

3. Philadelphia 6. Atlanta 9. Minneapolis 12. San Francisco 


T 


MEMBERS AND QUALIFICATIONS 


Board of Directors— -9 Members 
Term — 3 years; 1 new director selected each year in each 
class; divided into 3 classes —"A", "B”, and *‘C , selected 
as below; no member of Congress shall be a director; shall 
annually select from each Reserve District a member of 
Federal Advisory Council 


Class “C" —3 Members 
Appointed by Federal Reserve Board; one 
having banking experience who is to be Chair¬ 
man and Federal Reserve Agent; none can be 
officers, directors, employes, or stockholders 
of any bank. 


CLASS "B”: 
Three members 
elected by member 
banks to represent 
business interests 
of district; none 
can be officers, 
directors, or em¬ 
ployes of any 
bank. 


Class "A” 
Three mem¬ 
bers elected 
by member 
banks to rep¬ 
resent these 
banks. 


Federal Reserve Agent 
Through him Federal Reserve Board 
issues notes and supervises the Fed¬ 
eral Reserve Bank. Member class 
*‘C” (See footnote No. 1.) 


CAPITALIZATION 

Not less than SLOOCb 
000; shares $100 par 
value; tax exempt; 
non-transferable; to 
be subscribed by 
member banks in the 
district. Only stock 
of member banks 
shall be voted. 


Six members appointed or removed by 
President with consent of Senate; only 
1 from a district; term of office—10 
years, the terms of members expiring in 
different years; 2 must be experienced in 
banking; all to give entire time; salary 
$12,000 a year each; 1 of these to be 
Governor and 1 Vice-Governor of Board 
as designated by the President. 


-L 


No member of Congress shall be a 
member of this Board; all members 
including members ex-officio shall be 
ineligible to hold office position or 
employment in any member bank 
while in office or for 2 years there¬ 
after. No member shall be an offi¬ 
cer, director, or stockholder of any 
bank, banking institution, or trust 
company. 


POWERS OF 
FEDERAL RESERVE 
BANKS 

(See footnote No. 3) 


RESERVES 
Must maintain at least 
35% of deposits in gold 
or lawful money; also 
40% in gold against 
its reserve notes in ac¬ 
tual circulation; 5% of 
this latter reserve may 
be in the U. S. Treasury 
as a redemption fund of 
Federal Reserve notes 
and may consist of gold, 
gold certificates or dis¬ 
counted paper. 


EARNINGS 

Dividends cumulative at 
6% rate. The balance of 
net earnings after divi¬ 
dends have been paid are 
carried to surplus until the 
surplus equals 100% of 
capital stock. Thereafter 
10% to surplus and the 
balance to the Govern¬ 
ment as franchise tax. 


FEDERAL RESERVE NOTES 
Issued to Federal Reserve banks by the 
Federal Reserve Board and are obliga¬ 
tions of U. S.; denominations, $5, $10. 
$20. $50, $100, $500, $1,000. $5,000. and 
$10,000; redeemable in gold at U. S. 
Treasury and in gold or lawful money at 
Federal Reserve Banks; receivable by all 
national and member banks and for all 
taxes, customs, and other public dues. 
They represent a prior lien on the assets 
of issuing bank and are also secured by an 
equal amount of paper indorsed by the 
member bank accepted for rediscount or 
gold or gold certificates. No Federal 
Reserve Bank may pay out notes of an¬ 
other Federal Reserve Bank. 


MEMBER BANKS 

See footnote No. 4 


KIND AND QUALIFICATIONS 


NATIONAL BANKS 


STATE BANKS 

All National Banks in a district must belong to Federal Reserve Bank. Each 
bank must subscribe to stock equal to 6% of its paid-up capital and surplus, 
one-half payable on approval of application and one-half subject to call by 
Federal Reserve Bank. All payments to be in gold or gold certificates. A 
foreign branch can be maintained by a National Bank which has a capital and 
surplus of $1,000,000 or over. National Banks can invest within 10% of its 
naid-in capital stock and surplus in any such foreign corporation engaged in for¬ 
eign banking. Any National Bank outside of Central Reserve cities may make 
loans secured by improved and unencumbered farm lands for a period! of not 
over five years or other real estate not over one year, in district or within 100 
miles of bank irrespective of district. No loan shall be more than 50 , c of 
actual value of property put up as security. Tola! of such loans made by any 
bank shall not be more than 25% of its capital and surplus or one-third of its 


May become members of Federal Reserve Bank. Must 
comply with reserve and capital requirements. Must sub- 
scrilx; and pay for stock on same basis as a National Bank. 
But no Federal Reserve Bank shall discount for any state 
hank or frust company notes or drafts of any one borrower 
whose indebtedness to such state bank or trust company 
exceeds the amount which the state bank or trust company 
could loan, were it a National Bank. 



REFUNDING OF U. S. 2%, BONDS 
From December 23, 1915, for 20 years any member bank can 
ask Secretary of Treasury to sell the U. S. Bonds securing its 
circulation notes. The Federal Reserve Board may direct the 
Federal Reserve Banks to buy at par not over $25,000,000 of 
these bonds in any one year. The bonds sold for account of each 
member shall be assigned in writing to the Federal Reserve 
Bank purchasing same. The U. S. Treasury shall pay to member 
bank selling such bonds any balance due after redeeming its 
outstanding notes; the Federal Reserve Banks purchasing such 
bonds can take out circulating notes equal to a par value of 
such bonds. 


n 


reserves' 

Demand deposits are those payable within 30 days; time 
deposits are those payable after 30 days. Reserves must be 
held as below: 


IN COUNTRY BANK ' 

On deposit with Federal Re¬ 
serve Bank of its district, at 
least 7% of total demand de¬ 
posits and 3% of its time de¬ 
posits. 


IN RESERVE CITV 

BANKS 
On deposit with Federal Re¬ 
serve Bank of its district, at 
least 10% of total demand de¬ 
posits and 3% of time deposits 


IN CENTRAL RESERVE 

CITY BANKS 
On deposit with Federal Re 
serve Bank of its district at 
least 13% of total demand de¬ 
posits and 3% of its time de¬ 
posits. 


NOTE NO. 1 

The Federal Reserve Agent: Shall be the Chairman of Board of Directors of a Federal Reserve 
Bank and must give bond. He shall maintain a local office on premises of Federal Reserve Bank and be 
the official representative of the Federal Reserve Board and make regular reports to it. Salary fixed by 
Federal ResenTBoard but paid by the Federal Reserve Bank to which he is designated. He holds col- 
I ncral put up by a Federal Reserve Bank to secure the notes it issues. He shal hold the gold, gold 
certificates. U or lawful money which a Federal Reserve Bank puts up to reduce its outstanding notes 

exclusively, for this purpose or if so directed by the Federal Reserve Board may transmit gold to Treas¬ 
ury of United States for the exclusive purpose of redeeming such notes. 


NOTE NO. 2 

Powers of Federal Reserve Board; To regulate the issue and retirement of Federal Reserve 
notes; to permit or require rediscounting between member banks at a rate determined by the Board; 
to suspend or remove officials of Federal Reserve Banks; to levy upon said banks semi-annual asess- 
ments to meet estimated expenses of this Board This Board may exercise functions of C earing 
House and may require Federal Reserve Banks to do the same for member banks; may fix rate olinter- 
csi to be charged Federal Reserve Banks on Federal Reserve notes issued, and also the charges to be col¬ 
lected by member banks for checks cleared through Federal Reserve Banks It has power to examine 
Federal Reserve Banks and member banks and to exercise general supervision over Federal Reserve 


Banks. This Board shall establish a tax on decreasing reserves and may suspend for stated periods re¬ 
serve requirements. It shall publish weekly statements showing condition of each Federal Reserve Bank 
and of all in consolidated form; has power to require writing off doubtful assets of Federal Reserve Banks; 
to suspend or remove officers or directors of a Federal Reserve Bank and to suspend, reorganize, or 
liquidate Federal Reserve Banks violating this Act. It shall fix salaries of all bank examiners and 
report same to Congress; shall have all Federal Reserve Banks examined at least once a year and may 
add from time to time to the list of cities in which National Banks cannot make loans secured by real 
estate. The Board may give permission to a National bank to act as fiduciary, to a member bank to 
accept drafts to 100% of its capital and surplus, also to accept drafts to create dollar exchange. It 
may make regulations to carry out various provisions of the Federal Reserve Act. 

NOTE NO. 3 

Powers of a Federal Reserve Bank: To receive deposits from United States, any of its member 
banks, other Federal Reserve Banks and also to receive for exchange or collection deposits from non-mem¬ 
bers maintaining a sufficient balance with the Federal Reserve Bank of its district. 

To discount notes, drafts and bills of exchange drawn for agricultural, industrial or commercial pur¬ 
poses and to discount bankers’ acceptances. 

A Federal Reserve Bank may buy and sell in the open market at home or abroad cable transfers and 
bankers’ acceptances, and bills of exchange; deal in gold coin and bullion at home or abroad; buy or sell 


bonds and notes of the United States, and state, county, district or municipal notes with a maturity of not 
over six months from purchase date; purchase from member banks and sell bills of exchange arising out of 
commercial transactions; establish from time to time thru the Federal Reserve Board rates of discount on 
each class of paper; establish accounts with other Federal Reserve Banks; appoint correspondents and 
establish agencies in foreign countries. 

NOTE NO. 4 

Member Banks: Shall not be subject to visitorial powers except those authorized by law. No 
officer, director, employe, or attorney of a member bank shall benefit by or receive directly or indirectly 
any fee, commission, gift, or other consideration in connection with the business of the bank, except the 
usual salary or director’s fee, under penalty of fine and imprisonment. Every National Bank shall be 
examined at least twice a year by examiners appointed by Comptroller of Currency. The provisions that 
a National Bank shall count the 5% fund for redemption of its notes as its lawful reserve, and that 
it shall deposit with Treasury U. S. bonds before commencing business, are repealed. No member bank 
shall keep on deposit with a non-member bank more than 10% of its own paid-up capital and surplus. 
No member bank shall act as Agent of a non-member bank in obtaining discounts from a Federal Reserve 
Bank except by permission of Federal Reserve Board. A member bank may not accept drafts in excess of 
one-half of its paid up capital and surplus except by permission of the Federal Reserve Board when it may 
accept drafts to 100%, and also drafts to create dollar exchange up to 50% of its capital and surplus. 




































































































































































































FEDERAL RESERVE BANK SYSTEM 309 


with the Federal Reserve Bank which counts as 
reserve, or they may take out Federal Reserve 
notes to pay out over their counters as cash. 

Thus the great advantage to the member banks 
in “ pooling ” their reserves with the Federal Re¬ 
serve Banks is at once evident. All of our worst 
panics in the past have started in a single section, 
and, like a great fire, have spread over the country 
because other depositors, becoming frightened, 
began to draw their balances from their banks, 
causing the so-called “ runs ” and creating a gen¬ 
eral panic. By extending the proper aid to the 
banks first affected, the worst features of our na¬ 
tion-wide panics could have been quenched with 
comparatively little difficulty. 

To accomplish its next prime object, that of sup¬ 
plying an elastic currency, the new law has pro¬ 
vided a currency which can be based partly on com¬ 
mercial paper. This currency is known as Federal 
Reserve notes. These notes are issued only by 
Federal Reserve Banks to their member banks 
in return for gold or eligible paper which their 
member banks deposit with them. Thus when 
business activity increases, as in the fall of the year, 
the amount of commercial paper offerings will in¬ 
crease so that collateral for the new currency will 
automatically become available. Moreover, as 
business demands decrease, the currency will also 
decrease; for when the discounted paper which is 
furnished as collateral falls due, it must be col¬ 
lected. Since a member bank has indorsed the 
paper, the reserve bank will presumably deliver it 


310 


BUSINESS BAROMETERS 


to the member bank for collection and the latter 
will, in so far as possible, deliver national bank 
notes or Federal Reserve notes. If, however, busi¬ 
ness demands still continue heavy when the collat¬ 
eral paper falls due, the member bank may sub¬ 
stitute other collateral in its place or the Federal 
Reserve Bank may keep the Federal Reserve notes 
outstanding through the security of its gold reserve. 

As to the national bank notes now outstanding, it 
was provided that after December 23, 1915, and for 
twenty years the Federal Reserve Banks will, in 
reality, take over the national bank notes (at the 
rate of not more than $25,000,000 a year), paying 
the member banks par value for the government 
bonds which now secure said notes. In order to 
fill the gap in the currency left by retiring the 
national bank notes, the Federal Reserve Banks 
may issue reserve bank notes in their place. These 
must not be confused with the Federal Reserve 
notes. The reserve bank notes are the same as the 
old national bank notes except that they are issued 
only to the Federal Reserve Banks which can take 
any amount of them by depositing an equal par 
amount of United States bonds with the Treasurer 
of the United States. These notes are intended to 
fill the need of a minimum circulating medium, 
which fluctuates very little and has no need for 
elasticity. Their advantage over the national bank 
notes is that they can readily be retired, being 
controlled entirely by the Federal Reserve Banks. 

The third major purpose of the Federal Reserve 
Act is to facilitate the financing of legitimate in- 


FEDERAL RESERVE BANK SYSTEM 311 


dustrial, commercial and agricultural transactions. 
To this end it has given eligible commercial paper 
precedence over every other form of credit and has 
made it legal for certain national banks to pur¬ 
chase farm real estate mortgages. Commercial 
paper has been made the very basis of the new 
currency. 

The requirements for eligibility to rediscount 
which are imposed on commercial paper are very 
important. They place it on a basis of the char¬ 
acter of the maker as well as on his financial stand¬ 
ing. The requirements are so framed as to make it 
easier for the man of ability and character to obtain 
the credit to which he is rightly entitled. All of 
the great influence of this important section of the 
Act has been turned to the fostering of productive 
enterprise and to discouraging the sort of specula¬ 
tion which is unproductive and harmful. Such a 
fundamental change in the banking practice of a 
country must necessarily come about rather gradu¬ 
ally, but the principle of the new system is economi¬ 
cally sound and there is good reason to believe that it 
will be successful. 

To facilitate the financing of foreign trade, the 
Act provides that member banks of the system 
may deal in foreign acceptances and establish 
foreign branches, a radical departure from the old 
policy. Briefly, foreign acceptances are used as 
follows: A merchant in this country who is buying 
wool in Argentina goes to a bank here and gets a 
letter of credit which he sends to his buyer in 
Argentina. His buyer pays for the wool by a draft 


312 


BUSINESS BAROMETERS 


on the American bank in dollars instead of pounds 
sterling as heretofore. When the draft comes to 
this country, is accepted by the American bank and 
then is sold in the open market. When it becomes 
due, the merchant can pay it at his own bank. 
The practice heretofore has been that the United 
States bank would give the merchant in this coun¬ 
try a letter of credit drawn on either a German or 
English banker, payable in one of those two coun¬ 
tries. Besides the commission which the United 
States merchant had to pay, which amounted in 
some cases to four or five separate commissions, he 
was obliged to buy exchange in this country, con¬ 
verting dollars into the foreign medium to pay that 
draft when it became due. Besides running the 
risk of conversion, he lost on an average of about 
ten days’ time through his having to remit. While 
the development of a foreign acceptance market in 
this country has been slow, there is good reason to 
believe that this provision in the Federal Reserve 
Act will eventually become a great factor in build¬ 
ing up our foreign commerce. 

All of the provisions described above have aimed 
at the fullest employment of the nation’s finances. 
The question now arises, “ What is to prevent a 
tremendous over-expansion of credit, now that the 
bars are down? ” This has been the subject of 
much discussion which really only the coming years 
can definitely settle. Important among the safe¬ 
guards which have been provided is the one that 
only gold or high-grade commercial paper (as de¬ 
fined by the Federal Reserve Board) is acceptable 


FEDERAL RESERVE BANK SYSTEM 313 


as collateral for Federal Reserve notes. The act 
was amended in 1923 to allow the rediscount of agri¬ 
cultural paper with 9 months maturity. Such paper 
having a maturity in excess of six months is how¬ 
ever not eligible as a basis for issuance of Federal 
Reserve notes unless secured by warehouse receipts 
or similar negotiable documents. The paper must 
have not longer than ninety days before maturity, 
and except in the case of “ bills of exchange drawn 
in good faith against actually existing values ” 
no bank can lend in excess of 10% of its capital 
and surplus to any one firm or individual. Also 
there are provisions regarding bank examinations 
and reports. 

These restraints in themselves, however, could 
never prevent inflation. The great responsibility 
for safety lies with the bankers and the officials of the 
system. First, all loans will be carefully scrutinized 
by the individual bankers. If, however, the situa¬ 
tion gets beyond their control, the reserve bank 
of the district will take a hand. Rates for redis¬ 
count will be raised and commercial paper offered 
as collateral will be more carefully scrutinized. 
Finally, if over-expansion continues, the Federal 
Reserve Board, which will keep a close watch 
wherever trouble is evident, will reject the Reserve 
Bank’s applications for notes, and insist that a 
higher rate of discount be charged the member 
banks of the district affected, and if outside help is 
needed, it will permit or require the other Reserve 
Banks to rediscount for the Reserve Bank of the 
district in which over-expansion is threatened. 


314 


BUSINESS BAROMETERS 


In short, the supervision of the nation’s banking 
by men of ability and experience is the law’s great¬ 
est provision against inflation and there is good 
reason to believe that it will prove effective, just 
as it did for years in the nations of Europe. Per¬ 
haps instead of describing this great provision of 
the system last, we should have placed it first, for 
it promises a new era in the nation’s banking. 

In the few pages devoted to this subject, no 
attempt has been made to describe more than the 
main features of the law, for nearly all of the details 
of organization are shown on the chart opposite 
page 308 more clearly than we could describe them. 
If, however, the reader wishes a still more com¬ 
plete discussion of the law, we would refer him to 
the book written by Prof. Edwin Walter Kemmerer, 
entitled “ A B C of The Federal Reserve System,” 
the book by Professors Conway and Patterson, 
entitled “ The Operation of the New Bank Act,” 
also “ The Federal Reserve Act ” by C. W. Barron, 
“ The Federal Reserve System ” by Henry Parker 
Willis, and to the Act itself, which is in very 
readable form. 

CLEARING HOUSE CERTIFICATES 

Although there is nothing in the new law which 
prohibits the use of Clearing House Certificates, the 
provision made for elasticity of currency is so com¬ 
prehensive that recourse to Clearing House Cer¬ 
tificates in the future is not probable. However, 
some facts from an article which appeared in Van 


CLEARING HOUSE CERTIFICATES 315 

Norden’s Magazine relative to these certificates 
will show the part they have taken in previous 
panics. 

“ An issue of Clearing House Certificates was 
authorized by the Associated Banks of New York 
City for the ninth time in their history, and the 
fifth time since the Civil War, Saturday morning, 
Oct. 26, 1907. These certificates are a kind of 
emergency currency; they have never been author¬ 
ized by law, and are used only between banks; they 
stand midway between promissory notes secured 
by collateral and asset currency. 

“ The first time such certificates were authorized 
was in November, 1860. Banks in different states 
had then just suspended payments. November 12 
there was a panic on the Stock Exchange, with 
declines of from 8 to 12 points in the prices of 
stocks. With a view to stopping the panic, the 
New York banks decided to be more liberal in 
making loans. To increase their resources, they 
appointed, November 21, a committee of the 
Clearing House to receive from banks in their 
membership, and hold for them, New York and 
United States government bonds, and to issue 
therefor certificates for 75 per cent of their value 
which would be accepted at the Clearing House 
in payment of balances. To insure the redemp¬ 
tion of this paper as soon as the emergency passed, 
the holders were charged 7 per cent interest. The 
plan was successful in stopping the panic. A 
period of liquidation ensued. From January 5 to 
August 17, 1861, the specie deposits doubled and 


316 


BUSINESS BAROMETERS 


the bank loans were reduced from $129,000,000 to 
$108,700,000. 

“ Within a few months thereafter, the Associated 
Banks of New York, at three different times, issued 
Clearing House certificates to enable them to sub¬ 
scribe for new issues of United States bonds which 
could be paid for only in specie. Although these 
certificates were issued for patriotic reasons, all 
those subsequently issued in times of panic, have 
been of substantially the same form as those first 
issued in 1860; but since 1873 the rate of interest 
has been 6 per cent. 

“ The statistics of these issues by the Associated 
Banks of New York City are given in the following 
table: ” 


CLEARING HOUSE CERTIFICATES ISSUED IN 


Year 


NEW YORK 

Maximum Out- 

Date of Date of standing at any 

First Issue Final Cancellation Total Time 


1860 

Nov. 23 

Mar. 

9, 

1861 

$ 7,375,000 

$ 6,860,000 

1861 

Sept. 16 

Apr. 

28, 

1862 

22,585,000 

21,960,000 

1863 

Sept. 15 

Feb. 

1, 

1864 

11,471,000 

9,608,000 

1864 

Feb. 29 

June 

13, 

1864 

17,728,000 

16,418,000 

1873 

Sept. 22 

Jan. 

14, 

1874 

26,505,000 

22,410,000 

1884 

May 15 




24,915,000 

21,885,000 

1890 

Nov. 12 

Feb. 

7, 

1891 

16,645,000 

15,205,000 

1893 

June 21 

Nov. 

1, 

1893 

41,490,000 

38,280,000 

1907 

Oct. 26 

Mar. 

28, 

1908 

101,060,000 

88,420,000 

1914 

Aug. 3 

Dec. 

1, 

1914 

124,695,000 

108,185,000 


IMPORTS OF MERCHANDISE INTO THE 
UNITED STATES 

Connected with fundamental statistics and very 
closely related to one another are the three following 
subjects: 






































































IMPORTS OF MERCHANDISE 


317 


Imports of Merchandise into the United States. 

Exports of Merchandise from the United States. 

Balance of trade between foreign countries and 
the United States. 

Each of the three subjects is absolutely depend¬ 
ent upon the others and, were it not for the separate 
tables connected with each subject, it would doubt¬ 
less be simpler to treat all three in one compre¬ 
hensive section entitled “ Imports, Exports, Trade 
Balances and Volume.” Owing, however, to the 
fact that it is absolutely necessary for the banker 
or merchant to divide the figures into three separate 
tables and not allow them to be combined in any 
way, each is here treated independently. 

No detailed definition need be given of the im¬ 
ports of the United States except that the word 
import refers to the valuation of the raw material, 
manufactured goods and all other products pur¬ 
chased from abroad and entering any port or cross¬ 
ing any boundary of the United States. It may 
be mentioned also that although the figures pub¬ 
lished by the Government are correct for compara¬ 
tive purposes, they are, as a matter of fact, low. 
For this there are two reasons: first, there is a 
large quantity of goods brought into this country 
of which no record is ever made; and secondly, the 
“ values ” are placed by the importers at the lowest 
possible figures in order that the charge for duty 
will be as little as possible. 

(Figures prior to 1867 are given for the fiscal year ending 
June 30. After that year they are for the calendar year.) 


318 


BUSINESS BAROMETERS 


TABLE OF UNITED STATES IMPORTS 


Year 

Imports 

Per 

Capita 

Year 

Imports 

Per 

Capita 

1860 

$353,616,119 

$11.25 

1892 

$840,930,955 

$12.91 

1861 

289,310,542 

9.02 

1893 

776,248,924 

11.68 

1862 

189,356,677 

5.79 

1894 

676,312,941 

9.97 

1863 

243,335,815 

7.29 

1895 

801,669,347 

[11.60 

1864 

316,447,283 

Q.30 

1896 

681,579,556 

9.66 

1865 

238,745,580 

6.87 

1897 

742,595,229 

10.32 

1866 

434,812,066 

12.26 

1898 

634,964,448 

8.66 

1867 

371,476,175 

10.23 

1899 

798,967,410 

10.68 

1868 

368,006,572 

9.94 

1900 

829,149,714 

10.86 

1869 

438,455,894 

11.60 

1901 

880,419,910 

11.34 

1870 

461,132,458 

11.97 

1902 

969,316,870 

12.30 

1871 

573,111,099 

14.47 

1903 

995,494,327 

12.42 

1872 

655,964,699 

16.15 

1904 

1,035,909,199 

12.71 

1873 

595,248,048 

14.27 

1905 

1,179,144,550 

14.24 

1874 

562,115,907 

13.13 

1906 

1,320,501,572 

15.69 

1875 

503,153,936 

11.43 

1907 

1,423,169,820 

16.29 

1876 

427,347,165 

9.47 

1908 

1,116,374,087 

12.54 

1877 

480,246,300 

10.37 

1909 

1,475,520,724 

16.28 

1878 

431,812,483 

9.07 

1910 

1,562,904,151 

16.94 

1879 

513,602,796 

10.52 

1911 

1,532,359,160 

16.32 

1880 

696,807,176 

13.88 

1912 

1,818,073,055 

19.04 

1881 

670,209,448 

13.06 

1913 

1,792,596,480 

18.47 

1882 

752,843,507 

14.36 

1914 

1,789,276,001 

18.00 

1883 

687,066,216 

12.81 

1915 

1,778,596,695 

17.79 

1884 

629,261,860 

11.48 

1916 

2,391,635,335 

23.60 

1885 

585,868,673 

10.49 

1917 

2,952,467,955 

28.73 

1886 

663,429,189 

11.57 

1918 

3,031,212,710 

29.10 

1887 

708,818,478 

12.09 

1919 

3.904,364,932 

38.02 

1888 

725,411,371 

12.11 

1920 

5,278,481,490 

49.32 

1889 

770,521,965 

12.58 

1921 

2,509,147,570 

23.15 

1890 

823,397,726 

13.15 

1922 

3,116,054,051 

27.65 

1891 

828,320,934 

12.96 




In studying the above table it is convenient to 
refer to only the “ per capita ” column which shows 
very clearly the great value of these figures in fore¬ 
casting a panic. At the close of the Civil War the 
people were importing on a basis of about $10 per 
capita and this steadily increased to over $16 in 
1872. This increase was far above what it should 


IMPORTS OF MERCHANDISE 


319 


have been, and was therefore naturally followed by 
the panic, which came the following year, namely, 
1873. As is the case with all panic years, the im¬ 
ports immediately dropped off from $16 to about 
$14 and steadily decreased for about five years. 

Beginning with 1879 the imports again increased 
and property likewise increased until 1882, when 
they again reached $14.36 per capita. Although 
this figure was not equal to the previous high 
figure for 1872, yet the rise was more r s apid and it 
is not surprising that in the latter part of the fol¬ 
lowing year there occurred another panic, namely, 
the panic of 1883-84. In 1885, or directly after 
this panic, imports again dropped to a minimum 
of $10.49, but gradually increased along the nor¬ 
mal line until they reached over $13 per capita, 
at which point they remained constant during 
1890, 1891 and 1892. As could readily have been 
predicted, these high figures were followed by an¬ 
other panic in 1893. During the next year, as is 
invariably the case, the imports again declined to 
$9.97. Since that time they have increased at a 
more or less irregular rate, up to 1907, when they 
again reached $16, at which figure they stood pre¬ 
ceding the great panic of 1873. Then followed a 
sharp reduction to $12.87, coincident with the panic 
of 1907-08 and its curtailing of imported luxuries. 
With the year 1909 imports have again increased 
to the above figures, therefore showing that the 
same law has been observed in connection with all 
panics excepting that of 1903, which, as explained 
under “ New Securities,” was chiefly due to one 


320 


BUSINESS BAROMETERS 


specific cause as stated by Mr. Morgan, namely, 
“ the congestion of undigested securities.” Where 
the figures on 80% of our subjects clearly forecasted 
all panics excepting said panic of 1903, in only a 
few tables was the approach of this panic indicated. 
On the other hand, in these few tables, especially 
the table for “ New Securities Listed ” and “New 
Corporations/* the increase was so tremendous, 
several hundred percent, that they of themselves 
were a sufficient danger signal, even though the 
figures on the other subjects appeared normal. 

Thus in studying the figures on imports, we see 
that too great an increase in imports is a dangerous 
sign. This is due to two reasons: first, it neces¬ 
sitates the exportation of too much gold; and 
secondly, it signifies too great an extravagance on 
the part of the American people. As continued ex¬ 
ports of gold are Usually followed by advanced 
money rates, so too great an expenditure of money 
for luxuries and unproductive material, especially 
when imported, is followed first, by higher com¬ 
modity prices, and then by a period of economy. 

Not only are large figures for imports suggestive 
of a panic, but small figures, especially when they 
are increasing at a 'slow and conservative rate, are 
suggestive of better times. This latter phase is es¬ 
pecially well illustrated in an article which appeared 
some time ago in the New York Evening Post. 
It began by referring to a Wall Street man who 
rather facetiously remarked that good times were 
surely coming for he noticed that people were 
“ wearing their old clothes.” This remark, made 


IMPORTS OF MERCHANDISE 


321 


carelessly, was nevertheless a statement of the tre¬ 
mendously important factor which personal thrift 
becomes during a period of depression. 

In times of abounding prosperity it is easy for 
people to assume a contemptuous attitude toward 
petty economies. The talk is of making money, 
not of saving it. But a panic brings out the eco¬ 
nomic truth about the relation of savings to new 
business operations. “ If must always be remem¬ 
bered,’’ writes Lord Welby, commenting on an 
American panic in the Contemporary Review, 
“ that the capital required to extend business and 
to open new fields of trade can only be supplied by 
the savings of the world. . . . But there is a 
limit to these accumulations, large as they are. If 
the passions of the world, the extravagance of the 
world, and above all the growing needs of the world 
trench too closely on the accumulations of the 
world, financial stringency will inevitably be the 
result.” And it is a fact that even the most trivial 
form of saving becomes a large financial operation 
when generally practised. 

How much can the American nation save should 
each man wear his clothes two years instead of one? 
The Census Report of Manufactures shows that the 
factory product of men’s clothing during a good 
year is valued at about $375,000,000. One-third 
of this, or considerably less than one-third on the 
basis of retail prices, would more than equal the 
entire balance of trade in this country’s favor in a 
normally favorable month. There are over $40,- 
000,000 worth of felt hats sold during a good year. 


322 


BUSINESS BAROMETERS 


By wearing their felt hats 50% longer than they 
iiave been accustomed to doing, plain Americans 
can effect a saving in a year greater than the 
great gold imports necessary to adjust conditions 
during a critical period. 

Yet it is not always with clothes that people 
adopt a policy of retrenchment. If, for example, 
they cut down by only one-third the amount they 
spend on fresh beef, leaving all other items on the 
butcher’s bill unaltered, the sum would be greater 
than twice the amount paid over the counters of the 
bank, which in October, 1907, endured the longest 
“ run ” in the history of banking institutions. Con¬ 
tract by the same proportion the consumption of all 
kinds of meat,— and many authorities think this 
would be well worth while from a hygienic point of 
view alone,— and a sum equal to the entire Gov¬ 
ernment surplus at the time of the panic on Nov. 1> 
1907, would be saved in less than ten months. 

As to the commodities which are classed as real 
luxuries, the facts are equally striking. Enough 
cigars were “ withdrawn for consumption ” in 1907 
to provide about eight and one-half cigars a week 
for every smoker, on the assumption that one-fifth 
of the total population, including babes in arms, 
may fairly be put down in that class. Even for mere 
purposes of illustration, no one would be cruel 
enough to suggest treating the cigars as the colo¬ 
nists once treated the tea. But in a great emer¬ 
gency the average smoker might consider cutting 
down his allowance to one cigar a day. That 
trifling act would make a difference in the country’s 


IMPORTS OF MERCHANDISE 


323 


cigar bill of more than three and one-half millions a 
year. 

Imports of luxuries into the United States during 
the fiscal year ended June 30, 1909, were valued at 
$210,872,120, as compared with $173,217,690 in 
1908 and $227,661,584 in 1907. This class of im¬ 
ports represented 16% of total imports in 1909, 
14% of the total in 1908 and 15% in 1907. The 
increase of $37,654,430 from 1908 was one indica¬ 
tion of the return of prosperous business conditions. 
The 1909 value, however, is $16,789,464 below the 
figures for 1907. 

Outside of imports of silk, both manufactured 
and unmanufactured, having a value of $110,622,- 
169, imports of wines and spirits played no small 
part in the total imports of this country. Cham¬ 
pagne imports, amounting to 436,628 dozen quarts, 
with a value of $6,863,785, were the largest during 
the same fiscal year (1909) in the history of the 
country and showed a very perceptible increase 
over 1907. The increase over 1908 totalled 68,959 
dozen quarts, or 18%. 

Uncut diamond imports were valued at $19,- 
313,585; and, while the value was $10,001,490 or 
over 100% greater than during 1908, it was still 
$4,651,853 below the total value for 1907. Total 
precious stone imports, having a value of $29,373,- 
070 the past fiscal year, were over 70% greater than 
during 1908, but considerably below the total for 
1907. 

The above suggestions are sufficient to illustrate 
the reason for tabulating not only annual but also 


324 


BUSINESS BAROMETERS 


monthly figures on imports, namely, as a barometer of 
waste or of economy. It is, however, unnecessary 
that the monthly figures should be tabulated on a per 
capita basis, as the change in population is so slight. 

Merchandise imports are also valuable indicators 
of the foreign exchange situation. For this purpose 
they are studied in connection with exports. A 
considerable balance of exports over imports is 
favorable to the exchange position of the country 
holding such balance; conversely, large excess of 
imports means an adverse rate of exchange against 
the country having such an excess — provided in 
either case that sufficient gold is not received, or 
sent, to balance the situation. 

The following conclusions are suggested relative 
to “ Imports.”* 

1. During a Period of Business Depression. 

(a) A normal increase signifies nothing im¬ 
portant, provided said increase does not adversely 
affect the balance of trade. 

.(b) A decrease signifies that fundamental 
conditions are improving. 

(c) No change signifies nothing of importance 
provided the exports are likewise constant. 

2. During a Period of Improvement Following a 

Business Depression. 

(a) An increase, if not too great, is natural. 

(b) A decrease signifies no immediate improve¬ 
ment. 

* These figures are valuable both as a barometer of the American demand 
for luxuries and for forecasting money conditions. 


EXPORTS OF MERCHANDISE 


325 


(c) No change signifies nothing of impor¬ 
tance, provided the exports are likewise constant. 

3. During a Period of Over-expansion. 

(a) An increase, especially if abnormally large, 
is a sign that over-expansion is nearing its end. 

(b) A decrease tends to lengthen the period of 
expansion, and is therefore a sign of continued im¬ 
provement. 

(c) No change signifies nothing definite. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase calls for caution. 

(b) A decrease is only natural. 

(c) No change calls for naution. 

EXPORTS OF MERCHANDISE FROM THE 
UNITED STATES 

By “ exports ” is meant the goods shipped from 
the United States to any foreign port or country. 
This includes all raw materials, manufactured arti¬ 
cles, and in fact anything for which a resident of 
the United States receives money. 

The monetary condition of the country depends 
on three things: 

1st. The amount of money in the country. 

2nd. The demand for money. 

3rd. The velocity of circulation. 

The first item, namely, the amount of money in 
the country, is very dependent upon the exports 
of the country. Technically, this is dependent 


326 


BUSINESS BAROMETERS 


upon the balance of trade, a term explained in the 
next section of this chapter, but practically it is 
dependent upon the exports. 

Formerly the amount of exports was dependent 
almost entirely upon the amount of raw material 
produced; that is, wheat, corn, cotton, live stock, 
products, etc. The condition of the main crops 
of wheat, corn, and cotton, as well as that of the 
smaller crops, such as hay, apples, potatoes, etc. 
determined the exports. With small crops the ex¬ 
ports were very small, while with large crops the 
exports were large. 

This condition, however, has changed during the 
past twenty years, in which period there has been 
a very great increase in exports. The total exports 
of the United States have increased from $800,000,- 
000 to more than $8,000,000,000 and this increase 
has been much larger in manufactures than in 
other products. In 1893 the United States was 
exporting about $677,000,000 in food products and 
raw materials, which amount increased only to 
about $946,000,000 for the fiscal year of 1913,— 
an increase of less than 40 percent. On the other 
hand, the exports of manufactured products in¬ 
creased from about $177,000,000 in 1893 to more 
than $1,500,000,000 in 1913,— an increase of more 
than 747 percent. 

Such a change in the proportions between the 
agricultural and manufactured exports is important. 
If exports are to depend upon manufactured articles 
rather than on raw materials, bread-stuffs, etc., 
the decline in exports which heretofore has occurred 


EXPORTS OF MERCHANDISE 


327 


during years of crop failures will tend to be elimi¬ 
nated. Andrew Carnegie once said that the time 
is coming when the greater part of the raw ma¬ 
terials, now forming the bulk of the export figures 
of this country, will be used here, and their place 
in export trade will be taken by manufactured 
articles. If so, the American manufacturers must 
reach the markets of the world and compete therein 
with all the other industrial and commercial 
nations. 

If this is so, and the figures for the past twenty- 
odd years seem to prove it, our exports probably will 
not only continue to increase, but the fluctuations 
will, as above suggested, be much less marked. 
This is another reason why we should carefully 
study the figures on the “ balance of trade,” rather 
than the figures on the “ exports ” or “ imports ” 
exclusively. 

Many merchants when studying foreign trade, 
instead of considering exports and imports sepa¬ 
rately, add them together and call their sum the 
volume of trade. This figure is valuable as a ba¬ 
rometer of general business activity. It should not 
be confused with the balance of trade, which is the 
difference between exports and imports, and is 
watched by bankers for its effect upon the money 
rates and gold supply. 

The following conclusions are suggested relative 
to “ Exports ” and also relative to “ Volume of 
Foreign Trade: ” * 

* These figures are valuable both as a barometer of foreign trade con¬ 
ditions and for forecasting money rates. 


328 


BUSINESS BAROMETERS 


1. During a Period of Business Depression. 

(a) An increase signifies an improvement. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

2. During a Period of Improvement Following a 

Business Depression. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing definite. 

3. During a Period of Over-expansion. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies no further improve¬ 
ment or that a decline may be expected. 

(c) No change calls for caution. 

4. During a Period of Decline Following a Period 

of Over^'expansion. 

(a) An increase signifies an improvement. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

BALANCE AND VOLUME OF TRADE 

One of the most important of the subjects that 
investors and merchants study when analyzing 
present conditions and forecasting future conditions 
is the balance of trade. When we have sold to 
foreign merchants raw materials or merchandise 
greater in value than that which they have sold 
to us, the balance of trade is said to be “ in favor 
of ” the United States as against foreign countries. 


BALANCE OF TRADE 


329 


This naturally results in the shipment to America of 
gold, to adjust the balance, or the selling in the 
United States of “ exchange ” at a discount, if the 
condition is but temporary. The balance of trade 
does not always determine the debtor country, as there 
are other factors to be considered, but as a rule this 
is the case. 

The “ other factors ” above referred to, are such 
factors as the sale of American securities abroad or 
the payment of interest by the United States and 
corporations therein to foreign security holders. 
Although from the bond dealer’s point of view it is 
very advantageous to have a large and wide foreign 
market for American securities, thus leaving so 
much more “ home ” money free for investments, 
yet it must always be remembered that each year 
it may be necessary to ship gold from the United 
States to pay the interest on these securities and 
that eventually gold must be shipped to pay the 
securities themselves. Moreover, the amount of 
gold exported during the year that these securities 
are paid or when at any time before they are due 
the foreign dealers decide to sell them, will often 
nullify the good of a certain portion of the trade 
balance in our favor for that year. 

If trade balances were dependent wholly on the ex¬ 
ports and imports of raw material, merchandise, etc., 
it would be unnecessary for merchants and investors 
independently to tabulate monthly figures on gold 
movements in addition to tabulating monthly figures 
on exports and imports. Owing, however, to these 
additional factors, caused by the sale of securities, 


330 


BUSINESS BAROMETERS 


payment of interest, expenditures of tourists travelling- 
abroad, etc., it is necessary to tabulate figures also on 
gold movements and these other factors. 

Certain merchants when tabulating figures on 
the balance of trade, which is the difference between 
the exports and imports, also tabulate figures show¬ 
ing the sum of the exports and imports or what is 
known as the “ volume.” This is wholly unnec¬ 
essary when the imports and exports have been 
tabluated separately, but rather is of use simply as 
a short-cut to avoid the necessity of tabulating 
both imports and exports separately. Figures, 
then, on imports, exports and the balance of trade, 
when tabulated each month serve as a wonderful 
barometer for discerning present conditions and for 
forecasting future conditions. 

Although the foreign trade statistics of other 
countries, when properly compiled for comparative 
purposes, are of interest to those studying the con¬ 
ditions of the United States, such figures are not 
conclusive in comparing the trade of two different 
countries. As there is no uniformity in the classi¬ 
fication in the exports and imports of two different 
countries and as the methods of valuation are also 
entirely different, it is very dangerous to make com¬ 
parisons between the various countries.* 

The following conclusions are suggested relative 
to the “ Balance of Trade in favor of the United 
States 

* Thi ? matter is discussed very clearly in an article on the “ Comparati- 
m Trade Statistics of Various Countries ” by Sir A. E. Bateman, 
y- Vf * Published by the American Statistical Association, New Series 
1893 Vol. 3, page 533. 


GOLD MOVEMENTS 


331 


1. During a Period of Business Depression. 

(a) An increase signifies an improvement. 

(b) A decrease signifies no improvement. 

(c) No change signifies that money rates may 
depend wholly on domestic conditions. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies that money rates will 
depend wholly on domestic conditions. 

3. During a Period of Over-expansion. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies that the end of the 
period of prosperity is approaching. 

(c) No change signifies nothing of impor¬ 
tance. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies that lower money 
rates may be expected, and the end of the decline. 

(b) A decrease signifies continued decline. 

(c) No change signifies nothing of importance. 

GOLD MOVEMENTS 

The following by a well known writer is a good 
explanation of this subject: 

“ The natural movement of gold divides itself 
readily into four classes. There is in the first place 
the primary movement from the mines to the dis- 


332 


BUSINESS BAROMETERS 


tribution centers, London for the European markets, 
and New York and Seattle for the United States. 
After that comes what might be called the first 
distributive movement, where the gold arriving, 
for instance, at London, is sold to the highest bidder, 
often representing far off countries. A readjust¬ 
ment movement follows where gold, for instance, 
purchased by Paris in London is sent on to Switzer¬ 
land, Italy, or Belgium or any other points. Lastly 
there is a constant flow of gold from one part of the 
world to another, the movement of which is due to 
the ancient causes of supply and demand, of trade 
and other balances to be paid, and of bank reserves 
to be built up or released. 

“ Whatever schemes of international gold cer¬ 
tificates or of an international clearing house may be 
proposed by financial economists for the purpose of 
reducing the gold movement, there can never be 
any question as to the necessity of the primary 
movement from the mines to the distributive cen¬ 
ters. Roughly speaking, the world’s gold produc¬ 
tion originates in three great sections, South Africa, 
Australia and the United States. From the former 
comes almost half of the gold mined in the world 
each year, and therefore bankers and merchants 
tabulate the monthly production of the Transvaal 
Mines. 

“ The great distance of these localities from any 
important financial market and the fact that most 
of the stock of the South African and Australian 
gold mines is held in England, makes London the 
point to which the product of those mines is natu- 


GOLD MOVEMENTS 


333 


rally sent, so that nearly one-half of the world’s 
annual production of gold conies into the London 
market for distribution. 

“ Arrivals of gold consigned to the London agents 
of the South African and Australian mines are fully 
advertised, and what amounts to a regular auction is 
held every time a consignment arrives. The Bank 
of England is always ready (must be, by law) to 
purchase all gold of standard fineness offered to it, 
at 77 shillings 9 pence per troy ounce. But very 
rarely does the bank, or any one else, secure bul¬ 
lion at this price. Usually the bidding of the rep¬ 
resentatives of the various banks puts the price well 
above that figure. 

“ London is the one free gold bullion market of 
the world. As the metal arrives from the mines it 
is sold to the highest bidder without fear or favor. 
But this process must not be confused with the 
gold market maintained by the Bank of England. 
Usually the Bank will sell gold bars at a price, but 
sometimes it will not, and then the cry goes up that 
London is no longer a free gold market. As a mat¬ 
ter of fact, the Bank of England is far from being 
a free gold market, but the open market is free and 
as long as there is any gold coming in, the highest 
bidder gets it. 

“ In the United States on account of our entirely 
different currency law, there is no bullion market at 
all, free or otherwise, and the primary movement 
is direct from the mines to the assay offices, where 
a fixed and unvarying price is paid for it. In other 
words, all the gold produced in this country im- 


334 


BUSINESS BAROMETERS 


mediately passes into its circulation. There is no 
Long trip to an open market, and then an apportion¬ 
ment to all parts of the world. The owner of the 
gold takes it to the nearest government assay 
office, where it is assayed and bought from him at 
so much per ounce. Afterwards if any one needs 
gold bullion, for export or other purposes, he can ob¬ 
tain it at the treasury at a fixed price, as long as the 
supply holds out. 

“ The very fact that there is a primary movement 
of gold from the Australian and South African 
mines to London makes necessary the distributive 
move to the various markets, whose representatives 
at the British capital have been successful in their 
bidding for this new supply. But even after that 
comes another movement, for the snaller markets 
are not directly represented in London, but must 
obtain the supplies of gold they need through their 
important correspondents. 

“ These three movements carry the gold from the 
place where it is mined to the lesser banking cen¬ 
ters, where its distribution is complete. But the 
movement of the metal by no means comes to an 
end with its distribution. There follows a fourth 
movement, dependent entirely upon financial con¬ 
ditions, the movement which will often result in 
the practical transfer of all or part of some firmly 
established gold supply to some distant market.” 

There are three distinct influences which bring 
about such movements. The first is the necessity 
of making international payments for merchandise 
or securities at times when exchange is scarce; 


GOLD MOVEMENTS 


335 


the second has to do with the maintenance or 
restoration of bank reserves, which can at times be 
accomplished only by the outright purchase of 
gold in other countries; the third is due to inter¬ 
national operations where bankers are anxious to 
transfer large balances from one point to another, 
and not finding exchange available in quantity 
send gold instead. 

From the very nature of these causes, it will 
readily appear that it is a mistake to imagine that 
the development of our international financial 
relations will eventually make it unnecessary to 
ship gold at all. Only one of them, the first, could 
possibly be affected by the arrangement of a 
system of international credits. These large pay¬ 
ments by one country to another, such, for instance, 
as the payment for the Panama Canal or the pay¬ 
ment to us of the San Francisco fire indemnity, 
continually have to be made, and often under 
circumstances and at times when it is impossible 
that there should be a sufficient amount of exchange 
available. It is hard to see how, even if an inter¬ 
national system of crediting and debiting should be 
arranged, payments of this kind could eventually 
be settled by remittances of gold or exchange, and 
as for gold shipments arranged for the building up 
or maintenance of bank reserves, it will appear 
that, as the bankers of different countries become 
more closely allied, the interchange of gold is 
greatly facilitated. Through various causes the 
gold reserve of the banks, particularly the great 
national banks of Europe, becomes depleted at 


336 


BUSINESS BAROMETERS 


times, and then these institutions are apt to call 
upon their foreign connections to send them the 
gold they need. 

The other reason which makes gold, often ap¬ 
parently a settled reserve, move from one country 
to another is that in the highly developed state of 
the foreign exchange business, balances are con¬ 
tinually being transferred to the points where they 
can be most advantageously used. As long as ex¬ 
change on the point to which the transfer is to 
be made can be bought, that will be'the form of 
remittance. When, however, exchange cannot be 
had, gold will be sent, and so it appears that the 
more balances transferred, the greater is apt to be 
the circulation of gold. 

The importing of gold does not necessarily mean 
“good times” nor even “lower money rates” nor the 
exporting, the approach of a crisis; nevertheless im¬ 
portant deductions may he made if monthly figures are 
systematically collected and tabulated thereon. These 
deductions have been summarized by Burton as 
follows: 

“ Every country will, under normal conditions, 
have a certain share of the gold or primary supply 
of the world. The different countries have been 
compared to reservoirs of water, of various sizes, 
connected by pipes. All the reservoirs will main¬ 
tain the same level. The share of each country is 
determined primarily by its wealth. There is a 
tendency for metallic money, which is a form of 
wealth, to maintain in every country a fixed pro¬ 
portion to other forms of wealth. But the share 


GOLD MOVEMENTS 


337 


of each is affected by the volume of its trade and 
other incidental circumstances, among which are 
established methods of transacting business, the 
habits of its people, and, notably, its currency sys¬ 
tem. The currency system affects the gold supply. 
Paper money displaces gold, and causes it to be 
sent elsewhere in a less or greater proportion, ac¬ 
cording as it is absolutely based upon a deposit of 
gold, is redeemable in gold on presentation, or is 
not redeemable at all. 

“ Methods of transacting business influence the 
supply. Where balances are largely settled at 
clearing houses, and checks generally employed, less 
currency and less gold are required. In this par¬ 
ticular, the contrast between England and France 
is very marked. The latter country makes less use 
of clearing houses and checks and accordingly re¬ 
quires a large supply of gold and silver, the latter 
metal being extensively used. 

“ The habits of the people exercise an important 
influence. After the Franco-Prussian War it was 
found that the French peasant proprietors had 
hoarded large sums of gold. In the great emer¬ 
gency created, these amounts were brought out and 
assisted in the payment of the indemnity. Fre¬ 
quently when native grandees in India die, it ap¬ 
pears that they have been accumulating a great 
stock of gold, much of it in the form of ornaments, 
which for years has been kept out of circulation. 
All this hoarding tends to increase the demand on 
the gold which is in circulation as money. The 
peasant, or grandee who hoards, causes so much of 


338 


BUSINESS BAROMETERS 


the world’s capital to lie idle. The benefit accruing 
in time of crisis or emergency to countries in which 
quantities of gold are withheld from general circula¬ 
tion is obtained at the cost of diminished activity 
and volume of business under ordinary conditions. 

“ M. Paul Leroy-Beaulieu quotes figures to show 
that France in 1885 had a circulation of metallic 
money amounting to 215 francs per capita; England 
and the United States had, respectively, 86 and 68 
francs per capita. Of course if the quantity of 
coin in circulation had been based upon per capita 
wealth at the time, England would have shown 
the largest quantity per capita, France next and 
the United States last. 

“ There is then a normal share of gold which be¬ 
longs to each country. If any country has more 
than its share, it will export. It is easy to recog¬ 
nize that from a gold producing country, such as 
Australia, South Africa or Alaska, the greater part 
of the gold mined will be exported. Likewise, if 
gold is held in any one country in such quantity 
that it can be invested elsewhere more advanta¬ 
geously, either in loans or in purchases, or can be 
sent abroad in payment of debts, it will be exported. 
If it is invested in loans abroad, it is an indication 
of surplus capital and makes a favorable showing. 
If invested in purchases at low prices, it shows 
ability to draw upon other countries for an increas¬ 
ing share of objects of utility. If the purchases 
show that home prices are higher than foreign, and 
a supply of things usually obtained at home must 
be obtained abroad, the export of gold is a sign of 


GOLD MOVEMENTS 


339 


danger. Thus an important question in determin¬ 
ing the shipments of gold, is the nature of the 
purchases or investments to be made with it. 

“ The specie exports and imports of this country 
have furnished distinct indications prior to e^ch 
period of disturbance, but their significance cannot 
be understood without an examination not only of 
our general situation, but also of the particular 
situation at different times. Of the various cir¬ 
cumstances under which excess of exports of gold 
indicate the approach of a crisis, may be mentioned 
the following: 

“First, when gold is required for purchases abroad 
which are made at high and rising prices. This 
indicates overaction and concurs with unusual in- 

t 

crease in the prices of domestic supplies. Espe¬ 
cially is this true if, in a time of rising prices, gold 
is exported for commodities usually supplied by do¬ 
mestic production. Such a condition cannot long 
continue without a reaction and an ensuing de¬ 
pression. The indications which are significant in 
connection with the imports of merchandise apply 
to the exports of gold. On the other hand, the ex¬ 
port of gold for purchases, when prices are low, is 
not an unfavorable condition. It indicates pur¬ 
chases upon advantageous terms. 

“ Second , when the export of gold is attended by 
a scarcity of money and a marked increase in the 
rate of discount, it is a decidedly unfavorable indi¬ 
cation. This is of the same kind as those indica¬ 
tions noticed in the conditions of banks. A steady 
increase in the rate of discount, or a decrease in the 


340 


BUSINESS BAROMETERS 


supply of gold, is a sure precursor of a crisis. The 
only question is how long this condition can con¬ 
tinue without a crash. 

“Third, an unusual balance of exports of gold, 
not explained by surplus production, continued for 
a considerable time, or a sudden withdrawal of large 
amounts is one of the most unfavorable conditions. 
It is to be noted that there is an exceptional sensi¬ 
tiveness in financial centres on the subject of gold 
exports, and sometimes an entirely normal export 
is interpreted as meaning instability, and destroys 
confidence when there is no need for distrust.” 

It should be added that, when for a succession 
of years gold is withdrawn from circulation by rea¬ 
son of the substitution of inconvertible paper as 
money, the conditions which exist are sure to vary 
from normal lines. Credit will rest upon a false 
basis and the inevitable tendency will be towards an 
increase in the quantity of paper money outstand¬ 
ing and a dangerous expansion of credit. 

In many respects the phenomena of a balance of 
gold exports are similar to those arising from a bal¬ 
ance of merchandise imports. The two are ex¬ 
pected to appear contemporaneously, but in essen¬ 
tial particulars they are different. Some differ¬ 
ences depend upon the question of gold production. 
In countries like South Africa and a portion of 
Australia, where gold mining is the leading indus¬ 
try, gold exports are naturally classed with mer¬ 
chandise exports, and an export is a favorable indi¬ 
cation. In non-producing countries like England 
and France, where gold is in demand principally as 


GOLD MOVEMENTS 


341 


money, imports are a favorable indication. There 
is another difference in a noticeable tendency to¬ 
wards contemporaneous decline in gold reserves in 
all the great financial centers. That which is lost 
in one country is not gained in another. This de¬ 
cline is explained by the withdrawal of considerable 
amounts to be hoarded or retained in circulation 
outside of the banks; and, to some extent, to the 
transfer of gold to the countries outside of the most 
advanced industrial and commercial circle. The 
influences which cause gold to be hoarded or re¬ 
tained in circulation outside of the banks are not 
unlike those which affect the circulation of paper 
money. International credits or payments fre¬ 
quently cause an excess of gold imports in a country 
to coincide with an excess of imports of merchan¬ 
dise. Again, a large demand for money, mani¬ 
festing itself in high rates of interest, may cause 
gold to be retained in a country contemporaneously 
with an unusual balance of imports. 

After the World War gold poured into the Fed¬ 
eral Reserve System, swelling the reserve ratios 
and presenting a great temptation for credit infla¬ 
tion. Such a situation is abnormal and exports of 
gold under these conditions are desirable. The 
movements, however, should be gradual. During 
the war period and again in 1920, 1921 and 1922, 
this country had a tremendous balance of exports 
over imports. Foreign gold and securities were 
taken in payment for goods. The result was that 
the leading foreign nations were compelled to find 
other media of exchange by which to carry on in- 


342 


BUSINESS BAROMETERS 


ternational trade. If a free movement of gold is 
to be resumed, a portion of the stocks of gold 
which we built up during the war must sooner or 
later be given up. This will probably take years 
to accomplish and should not disturb business in 
this country if it takes place gradually. 

1. During a Period of Business Depression. 

(a) An increase in gold exports forecasts an 
increase in money rates and suggests caution. 

(b) A decrease forecasts lower money rates 
and no improvement. 

(c) No change is unfavorable or favorable ac¬ 
cording to whether gold is being exported or im¬ 
ported. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase forecasts an increase in money 
rates but usually retards the improvement. 

(b) A decrease signifies continued improve¬ 
ment and forecasts lower money rates. 

(c) No change is unfavorable or favorable, ac¬ 
cording to whether gold is being exported or im¬ 
ported. 

3. During a Period of Over-expansion. 

(a) An increase signifies no improvement and, 
if continued over a long period, foretells the end 
of the period of over-expansion. 

(b) A decrease signifies continued improve¬ 
ment, but any exportation of gold should be con¬ 
sidered as unfavorable. 

(c) No change calls for caution. 


FOREIGN MONEY RATES 


343 


4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies no improvement and 
often calls for caution. 

(b) A decrease is the normal result of a de¬ 
crease in activity. 

(c) No change is unfavorable or favorable 
according to whether gold is being exported or im¬ 
ported. 

FOREIGN MONEY* RATES AND FOREIGN 
EXCHANGE 

These two subjects are usually discussed to¬ 
gether, first because they are co-related and 
secondly, because the subject of foreign money 
rates of itself is not sufficiently important to be 
treated independently. All that need be said as 
regards foreign money rates is that money, like 
water, seeks its own level, unless artificially held or 
forced. Therefore, if money rates are low in the 
United States, but for some time have been high in 
England, Germany or France, money rates in the 
United States are sure to increase soon, the increase 
to be followed possibly by a period of stringency. 
There are two reasons for this: first, the loans to 
American bankers by foreign bankers will be called 
for payment, or else the foreign rate will so be 
raised that it will be more profitable for the Ameri¬ 
cans to borrow at home; and secondly, foreign 
bankers will begin to borrow from America and 
thus take advantage of the lower American rates. 
As both of these causes are in operation at the 
same time, the rates very soon equalize, the foreign 


344 


BUSINESS BAROMETERS 


rates declining and the American rates increasing. 
The converse of this principle is also true. When 
the money rates in America are high, but the 
foreign rates have been low for some months, the 
tendency is for the American rates to decline and 
the foreign rates to advance. 

When tabulating foreign rates, investors and mer¬ 
chants usually consider the “ rate of discount ” of the 
three leading foreign banks: namely, the Bank of 
England, the Bank of France and the Bank of Ger¬ 
many. The tabulation and the interpretation of 
these rates is very simple, especially as the three rates 
are usually added and averaged, thus necessitating 
the use of only one table. The American merchant 
always keeps in mind, however, that low foreign 
money rates have their disadvantages as well as 
their advantages, as very often they signify a low 
condition of foreign trade which, during certain 
periods, may be spread to America. 

The changes in the Bank of England rate in re¬ 
cent years have been as follows: 


June 

June 

Jan. 

Feb. 

Oct. 

Oct. 

May 

June 

Sept. 

Apr. 

Apr. 

Mar. 

Sept. 

Feb. 

May 

Aug. 

Oct. 

Apr. 

Oct. 

Jan. 

Jan. 


1901:3* 

1901:3 

1902:3* 

1902:3 

1902:4 

1902:4 

1903:3* 

1903:3 

1903:4 

1904:3* 

1904:3 

1905:2* 

1905:3 

1912:3* 

1912:3 

1912:4 

1912:5 

1913:4* 

1913:5 

1914:4* 

1914:4 


Sept. 28, 
Apr. 5, 
May 3, 
June 21, 
Sept. 13, 
Oct. 11, 
Oct. 19, 
Jan. 17, 
Apr. 11, 
Apr. 25, 
Aug. 15, 
Oct. 31, 
Nov. 4, 


1905:4 

1905:3* 

1906:4 

1906:3* 

1906:4 

1906:5 

1906:6 

1907:5 

1907:4* 

1907:4 

1907:4* 

1907:5* 

1907:6 


Nov. 7, 1907:7 
Jan. 2, 1908:6 
Jan. 16, 1908:5 
Jan. 23, 1908:4 
Mar. 5, 1908:3* 
Mar. 19, 1908:3 
May 28, 1908:2* 
Jan. 14, 1909:3 
Apr. 1, 1909:2* 
Oct. 7, 1909:3 
Oct. 14, 1909:4 
Oct. 21, 1909:5 
Dec. 9, 1909:4* 


Jan. 29, 1914:3 
July 30, 1914:4 
July 31, 1914:8 
Aug. 1, 1914:10 
Aug. 6, 1914:6 
Aug. 8, 1914:5 
No change in 1915 
July 3, 1916:6 


Jan. 17, 1917:5* 
Apr. 5, 1917:5 
No change in 1918 
Nov. 5, 1919:6 
Apr. 15, 1920:7 
Apr. 28, 1921:6* 
June 23, 1921:6 
July 21, 1921:5* 


Jan. 6, 
Jan. 20, 
Feb. 10, 
Mar. 17, 
June 2, 
June 9, 
Sept. 29, 
Oct. 20, 
Dec. 1, 
Jan. 26, 
Feb. 16, 
Mar. 9, 
Sept. 21, 

Nov. 3, 
Feb. 16, 
Apr. 13, 
June 15, 
July 13, 
July 5, 


1910:4 

1910:3* 

1910:3 

1910:4 

1910:3* 

1910:3 

1910:4 

1910:5 

1910:4* 

1911:4 

1911:3* 

1911:3 

1911:4 

1921:5 

1922:4* 

1922:4 

1922:3* 

1922:3 

1923:4 



FOREIGN MONEY RATES 


345 


Foreign money rates, as affecting American 
money rates through the transferring of gold, are 
affected only by the purchase and sale of foreign 
exchange. Therefore, although merchants usually 
study only foreign money rates with their common 
knowledge of foreign exchange, yet theoretically, 
a study of foreign exchange will in itself suffice. 

Foreign exchange is quoted both as to “ actual 
rates ” and as to “ quoted rates.” For a general 
description of these headings, we quote Howard 
Irving Smith as follows: 

“ The quotation 1 actual rate 7 means the rate at 
which exchange 'is sold in large amounts by the 
dealer; the quotation ‘ posted rate 1 means the pre¬ 
liminary asking rate of the day before an actual rate 
is made, and this is the rate usually exacted for a 
small amount of exchange by a dealer. The actual 
and posted rates are the rates at which dealers sell 
bills of exchange issued by themselves. They do 
not, as a rule, announce the rates at which they will 
buy commercial bills of exchange; that is a matter 
of negotiation and depends on the nature of the 
bills. The newspapers, however, publish approxi¬ 
mate prices for commercial bills. 

“ Foreign exchange is payable in the money of 
the country upon which the exchange is drawn, 
that is, where the exchange is payable. The equiv¬ 
alent of SI.00 in English money is 49.3 pence or 
four shillings 1.3 pence. When foreign exchange 
is quoted in the money of the country where it is 
bought, the unit of the money of the country where 
payable is figured at so much money of the country 


346 


BUSINESS BAROMETERS 


where the bill is issued. Thus, when sterling 
exchange is quoted at $4.8665, £1 in exchange is 
worth $4.8665. 

“ When foreign exchange is quoted in money of 
the country where it is payable (not where it is 
bought), the unit of money of the country where it 
is bought is figured at so much in the money of the 
country where the bill is payable. Thus, when 
exchange on France is quoted at 5.18 (5 francs, 
18 centimes), $1.00 in exchange is worth 5.18 
francs. 

“ When a bill of exchange is quoted in the money 
of the country in which it is issued, but is payable 
(is to be paid) in the money of the country upon 
which it is drawn (where it is payable), the higher 
the quotation, or rate, the higher is the cost of such 
exchange, for the reason that a high rate requires 
more of the money of the country where the bill is 
purchased, to buy a given amount of the money of 
the country where the bill is payable than a low 
rate requires. 

“ On the other hand, when a bill of exchange is 
quoted in the money of the country upon which it 
is drawn (which is also the money in which it is to 
be paid), as francs, the higher the quotation the 
less the cost of such exchange, for the reason that 
more (in the foreign country’s money) can be 
purchased for $1.00 at a high rate than can be 
purchased at a low rate. 

“ Illustration: If exchange for £1 is purchased 
for $4.89 it costs more than if purchased at $4.84. 
On the other hand, if exchange for 525 centimes (5 


FOREIGN MONEY RATES 


347 


francs, 25 centimes) is purchased for $1.00 it costs 
less than if $1.00 is paid for 511 centimes; or, put¬ 
ting it the other way, $1.00 buys more in francs at 
the high rate than it does at the low rate. 

“ The amount paid for a time bill depends on the 
length of time it is to run and the rate of interest 
prevailing in the country where the bill is payable. 
A commercial bill payable in London three months 
after date is bought by a dealer in exchange in New 
York at a price which is equal to a bill payable on 
demand, less the three months’ interest at the ex¬ 
isting rate of interest in London. The London rate 
of interest serves as the basis in calculating the 
price of the bill, for the reason that the bill is pay¬ 
able in London and to make it equal to a draft 
payable on demand it must be discounted in 
London. 

“ High cost for exchange ordinarily means that 
the international balance is against the country 
where the high cost prevails; conversely, low cost 
for exchange ordinarily means that the international 
balance is in favor of the country where the low 
cost prevails.” However, as all of this may he as¬ 
certained by a study of foreign money rates and other 
tables already mentioned, it is unnecessary for the 
merchant to collect or tabulate figures on foreign 
exchange . 

The fact is that, so far from financial panics 
being confined to the United States in 1907, a really 
formidable credit crisis occurred that year in at 
least four foreign cities situated in four separate 
continents, two of these markets being wholly un- 


348 


BUSINESS BAROMETERS 


connected in a financial way with the United States 
and the financial collapse occurring in two of them 
before the panic broke out in our country in Oc¬ 
tober, 1907. As early as May, 1907, bank failures, 
hoarding of money and very general suspension of 
credit facilities were witnessed in Egypt, and Lon¬ 
don was hurrying along emergency shipments of 
gold to Alexandria, exactly as it hurried along the 
gold shipments to New York about six months 
later. At nearly the same time, bank failures and 
panicky conditions on the markets were happening 
in Japan. In almost every week of our own Octo¬ 
ber crisis, and on yet another continent, the pow¬ 
erful Banco Mobiliario of Valparaiso suspended 
payments, credit came to a halt in Chile, the cur¬ 
rency sank to a low level of depreciation, and the 
Chilian Government was forced to take measures 
of relief. Again almost simultaneously with our 
own crisis, panic broke out in Hamburg, Germany, 
carrying down two great commercial houses. 
Leading German financial experts pronounced the 
crisis the worst Hamburg had witnessed since 
1857. 

One hardly needs add to this list such other minor 
crises as the temporary breakdown in credit in 
Genoa in the middle of 1907, and the panic at Co¬ 
penhagen, a few months after our own, which com¬ 
pelled the Danish Government to come to the rescue 
by guaranteeing the assets of banks then subject 
to a run by depositors. What this part of the his¬ 
tory of 1907 conclusively proves is that financiers 
and historians must look elsewhere than to Ameri- 


FOREIGN MONEY RATES 


349 


can legislation and American banking for causes of 
that year’s panic. European economic experts 
have not found it difficult to assign the cause; it 
was indeed pointed out by the eminent Paris 
economist, M. Leroy-Beaulieu, even before the 
panic came. 

“ That cause was the exhaustion, in a violent 
world-wide industrial expansion and an even more 
world-wide speculation, of the world’s accruing 
capital resources, and a consequent strain on credit 
which, throughout the financial world, approached 
the breaking point* With such a tension in. the 
international chain of credit, the break was bound 
to come, either where the link was weakest or 
where the strain was greatest. The link was 
weakest in Chile and Egypt while the strain was 
incalculably the greatest in the United States, 
where speculation of an unheard-of rashness and 
magnitude had been raging for two years. The 
severity of the shock in all these localities, and the 
world-wide liquidation and reaction, in both finance 
and commerce which followed and which long pre¬ 
vailed, in Europe, Asia, Africa and South America, 
as well as in this country, were the logical and in¬ 
evitable outcome.” The effect of the great World 
War on United States conditions is fresh in the 
mind of everyone. Moreover the greatest eco¬ 
nomic influences of the war may still have to be 
experienced. Therefore the necessity of studying 
foreign conditions and not simply conditions in 
only one country, is apparent. 

The following conclusions are suggested relative 


350 


BUSINESS BAROMETERS 


to “ Foreign Money Rates,”* as expressed in 
figures of foreign conditions: 

1. During a Period of Business Depression. 

(a) An increase in foreign money rates usually 
signifies higher domestic rates. 

(b) A decrease signifies no improvement. 

(c) No change signifies “ no change.” 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher domestic 
money rates, and may retard further improvement. 

(b) A decrease if favorable. 

(c) No change signifies normal conditions. 

3. During a Period of Over-expansion. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher domestic 
rates, and signifies over-expansion is nearing its end. 

(b) A decrease signifies continued improve¬ 
ment. 

(c) No change means normal conditions. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase in foreign money rates or in 
foreign exchange usually forecasts higher domestic 
money rates, and further trouble. 

(b) A decrease signifies the reverse, providing 
all other factors remain constant. 

(c) No change signifies normal conditions. 

* These figures are also of special value in judging the course of domestic 
rates. 


PRODUCTION OF GOLD 


351 


PRODUCTION OF GOLD 

As to the effect of the production of gold, there is 
a diversity of opinion. That it is a subject of great 
importance when a long period of years is con¬ 
sidered is admitted by all; but many deny that it is 
of such importance when considering a period of 
only a few years. The theory that as the supply of 
gold (which is used as a standard of value and a 
medium of exchange) increases ,.interest rates and 
commodity prices must immediately increase, is 
actively combated by many authorities. If there 
were no other possible causes at work affecting 
interest rates and commodity prices, this theory 
would be taken more seriously, especially as it 
would involve a general decline in bonds and all 
fixed interest obligations; but even then it would be 
obliged to stand the test of experience. 

The former editor of the Engineering and Mining 
Journal, Mr. Walter R. Ingalls, claims to have 
shown by statistics and graphic diagrams, that 
there has been no correspondence between the 
fluctuations in the gold supply and those in prices. 
Going back to the time of the first notable modern 
increase in gold production, he showed that for 
some years, beginning with 1851, there was an 
apparent parallelism, but there was a drop in prices 
after the crisis of 1857, and then a recovery and 
increase until 1864, though the production of gold 
was then falling off. After that prices declined 
until 1870, while the gold supply fluctuated within 
narrow limits; but in 1871 prices started up again, 
with gold production declining. During the fall in 


352 


BUSINESS BAROMETERS 


prices after 1873, there was an upward turn in the 
production of gold and by a peculiar perversity, in 
view of any theory of cause and effect, it fell off 
again after 1879 as prices began to rise. The 
decline in gold production continued until 1883 
when there was another upward turn followed by a 
continued increase until 1896. The output was 
then more than double that of 1884 and the highest 
ever reached before that time; but during that 
period there was an almost continual decline in 
commodity prices, to contrast with the rise which 
took place, while the annual supply of new gold 
again doubled. This may not prove that the in¬ 
creased production of gold has had no effect upon 
its commercial value compared with the general 
mass of commodities, and consequently upon prices 
determined by its value as the standard of measure¬ 
ment and computation, but it does very conclu¬ 
sively refute the theory that the two things stand 
in the closest relation of cause and effect. There is 
certainly no close correspondence between them 
from year to year and the inevitable inference is 
that much more potent causes than the volume of 
gold in monetary use are at work in determining 
the course of prices. 

It is a question whether the demand for the use of 
gold as a basis of credit and exchange has not kept 
pace with the supply and prevented any absolute 
depreciation. Mr. Ingalls forcibly opposes the 
argument that the cost to capital and labor of pro¬ 
ducing gold has diminished and that available de¬ 
posits are on the increase, with cheapening methods 


PRODUCTION OF GOLD 


353 


of extraction. In connection with the question of 
increased demand, he took the increasing produc¬ 
tion of pig-iron as fairly representing the advance 
made in industries and trade generally and showed 
both by figures and graphic diagrams that its in¬ 
crease has been relatively greater than that of gold. 

The general subject of gold has best been pre¬ 
sented in a book entitled “ The Story of Gold ” by 
Professor E. S. Meade; while the theory that the 
rise in commodity prices is due to the increased 
production of the metal is well described in the book 
entitled “ Gold Supply and Prosperity,” edited by 
Byron W. Holt of New York City, who is generally 
recognized as one of the best informed men on this 
subject. Professor Irving Fisher has also given a 
great deal of study to this subject, and his book, 
“ The Purchasing Power of Money,” and his other 
able studies on the decrease in the purchasing power 
of the gold dollar, etc., should be read by all who 
wish to be well informed concerning this important 
matter. Another book on this subject is “ How to 
Invest When Prices are Rising,” published by G. 
Lynn Sumner & Co., Scranton, Pa. Based upon 
the assumption that the output of gold is to increase 
for the next ten years at an average rate of not less 
than 5%, Mr. Holt arrived at the following fourteen 
conclusions: — 

"(1). That the value of gold will depreciate as 
the quantity increases, though not, perhaps, at the 
same ratio. 

(2). That this depreciation will be measured by 
the rise in the average price level. 


354 


BUSINESS BAROMETERS 


(3) . That rising prices will soon lead again to 
rising and higher interest rates. 

(4) . That, because of high interest rates, the 
prices of bonds and most other long-time obliga¬ 
tions drawing fixed rates of interest, dividends or 
income will again decline to low levels. 

(5) . That, because of rising prices and high in¬ 
terest rates, the cost of materials and supplies will 
tend to decrease the net profits of all concerns the 
prices of whose products or services either cannot 
be advanced at all or are not free' to advance 
rapidly. 

(6) . That, because of rising prices, the net 
profits of all concerns that own their own sources 
of materials and supplies will tend to increase. 

(7) . That, because of rising prices of commodi¬ 
ties, the market prices of all tangible property will 
tend to rise. This includes lands, mines, forests, 
buildings and improvements. 

(8) . That, because of rising prices of com¬ 
modities and property, the prices of the stocks of 
corporations holding commodities or property will 
tend to advance. 

(9) . That, because of rising prices and there¬ 
fore of cost of living, wages must and will, tend to 
advance. 

(10) . That, because wages and salaries will not 
rise as much or as fast as will prices and the cost of 
living, there will be dissatisfaction and unrest 
among wage and salary earners. 

(11) . That, because of rising prices and property, 


PRODUCTION OF GOLD 


355 


there will be much speculation in commodities, 
stocks and real estate. 

(12) . That, because of the great profits that will 
result from speculation, honest industry will be 
discouraged and recklessness and extravagance will 
be encouraged. 

(13) . That, because rising prices will decrease 
the purchasing power of debts, and thus aid debtors 
at the expense of creditors, they will discourage 
saving and thrift. 

(14) . That, then, an increasing output of gold 
means rising prices, rising wages, high interest 
rates, the scaling of debts, speculation, unjust dis¬ 
tribution of earnings and wealth and general 
dissatisfaction and discontents 

These conclusions seem to follow each other 
logically, though their close connection is not 
wholly evident. The first two conclusions, being 
the more fundamental and important, Mr. Holt 
discusses as follows: 

, “ It is almost inconceivable that an increasing 
supply and output of gold, the standard and meas¬ 
ure of values, will not tend to raise prices. It is 
not asserted that a slight increase in the supply will 
cause prices to advance. The natural course of 
prices, especially of manufactured goods, is down¬ 
wards. To offset this cheapening tendency, due 
to invention and improvement, an increase of 
perhaps 2% a year in the supply of gold may be 
necessary. To offset the growing demand for gold, 
due to industrial expansion, an increase of perhaps 
1% more a year may be necessary. 


356 


BUSINESS BAROMETERS 


“ An increase of perhaps 3% a year in the world’s 
volume of gold, then, may be necessary to maintain 
stable prices. This being true, a smaller increase 
than 3% will result in declining prices, and a greater 
increase will result in advancing prices of commodi¬ 
ties. An increase of 5% a year in the supply of 
gold then would cause prices to rise an average of 
2% a year, and an increase of 8% in the supply 
of gold would cause prices to rise an average of 5% 
a year.” 

As to whether Mr. Holt or Mr. Ingalls is correct, 
the reader must decide for himself. It is very 
generally admitted that a sudden increase in the 
supply of gold at certain times gives impetus to 
business activity, results in the conception of new 
ventures and indirectly is accompanied by an ad¬ 
vance in prices. This rising movement in prices of 
itself encourages speculation and the extension of 
credit to a dangerous degree. Large profits lead to 
waste and extravagance, which conditions are fol¬ 
lowed by a crisis and a period of depression. There¬ 
fore, it seems reasonable to admit that the over¬ 
production of gold is one factor causing increased 
prices, thus indirectly affecting business conditions; 
but it is very illogical to point to the production of 
gold as the only factor affecting prices and interest 
rates. In fact, an increase in credits of any form 
(that is, bank deposits subject to check), and 
especially an increase in the velocity of circulation 
of said moneys and credits, are also important fac¬ 
tors. The increase in population, the destruction 
of natural resources, industrial combination, labor 


PRODUCTION OF GOLD 


357 


unions, increased cost of agricultural lands and 
many other factors tend to increase the prices of 
commodities, rates of interest and investment 
values. 

Nevertheless, “ Gold Production ” is an important 
subject, and it is the practice of most careful bankers, 
manufacturers and merchants regularly to tabulate 
the monthly production of the Transvaal mines as an 
index of the world’s production. Of this production 
it is said: “ Treatment of ore in Johannesburg 
continues seven days a week, and February, with 28 
days, is always a small month; while, other things 
being equal, a month with 31 days will have a bigger 
output than a month with 30 days. December is 
subject to special conditions, because there is a 
general clean-up at the end of the year, which 
always makes that month larger than others. 

From the time of the Boer War up to 1913, the 
Transvaal output increased steadily. In 1913, 
however, the production declined, due largely to 
l&bor troubles and also to added difficulty in min¬ 
ing at great depths. If this decline should con¬ 
tinue for a number of years it will prove an im¬ 
portant factor, unless new deposits are discovered 
to make up the deficiency. 

While a continued reduction in the world’s gold 
production may not be felt for years, it may mean 
ultimately a reduction in price of all commodi¬ 
ties not artificially supported; an advance in price 
of bonds; a reduction in rate of interest on mort¬ 
gages; lower wages in view of the consequent 
greater purchasing power of gold; and a decline in 


358 


BUSINESS BAROMETERS 


price of stocks caused by the transference of invest¬ 
ments from stocks to bonds. This last develop¬ 
ment might occur because of the great purchasing 
power of interest on bonds, the collapse of any in¬ 
flation movement in stocks, and the investor’s 
preference for a safe investment. The following 
conclusions are suggested relative to “ Gold 
Production 

1. During a Period of Business Depression. 

(a) A great increase tends at first to lower 
money rates, and to cause an improvement. 

' (b) A great decrease tends to increase money 
rates, and may signify no immediate improvement. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) A great increase tends at first to lower 
money rates (although the later effect may be the 
reverse) and signifies continued improvement. 

(b) A great decrease tends to increase money 
rates, and signifies no improvement. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

3. During a Period of Over-expansion. 

(a) A great increase is very dangerous and 
calls for caution. 

(b) A great decrease tends to upset conditions 
and also calls for caution. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 


COMMODITY PRICES 


359 


4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) A great increase tends to retard the re¬ 
adjustment. 

(b) A great decrease tends to hasten the re¬ 
adjustment. 

(c) No change signifies that money rates will 
be determined wholly by outside conditions. 

COMMODITY PRICES 

One cannot do better, when studying this sub¬ 
ject, than to refer to Hon. Theodore E. Burton’s 
book entitled “ Crises and Depressions,” in which, 
among other things, he states: — 

“ In the season of activity, which precedes a 
crisis, prices rise. This rise begins after the worst 
of the previous depression has been reached. At¬ 
tention has already been called to the fact that the 
rise in prices is unequal in different commodities. 
Iron and steel in their various forms, as well as 
other commodities required for construction, and 
those which supply new demands of consumption, 
show the most striking increases. During a de¬ 
pression, prices of these commodities fall first and 
most notably. The prices of other commodities 
do not fall so much or so early. In the preceding 
season of expansion they do not rise so much, and, 
in their rise as well as in their fall, they show, for 
the most part, only a remote effect of the activity 
or inactivity of the time. 

“ As is well known, it is the tendency of prices of 
iron and steel to reach and pass their maximum 


360 


BUSINESS BAROMETERS 


some time before the crisis occurs, though if the 
crisis be precipitated by an unexpected failure, the 
interval will be short or the high prices may con¬ 
tinue until the very outbreak of the crisis.* 

“ In the United States, prior to the crisis of 
September 18, 1873, a low price level appeared in 
almost all grades of iron and steel in January, 1871. 
This was followed by a rapid and almost unbroken 
rise, culminating in the months of October and 
November, 1872. A maximum price of rolled bar 
iron, $118.72 at Philadelphia, was reached in Octo¬ 
ber, 1872. The price fell, with slight fluctuations, 
to $80.64 in September, 1873, the month of the crisis. 

“ In the depression which followed the crisis of 
1873, prices of a majority of the varieties of iron and 
steel fell to a minimum in the latter part of the year 
1878, though steel rails and standard sections of iron 
rails fell to a minimum in the closing months of 
1877. The month of November, 1878, may, how¬ 
ever, be selected as the turning point. At that date 
No. 1 anthracite foundry pig iron had fallen to 
$16.50 per gross ton, less than one-third the price of 
September, 1872. 

“ In the expansion which followed 1878, prices 
reached their maximum in the months of January, 
February and March, 1880; but the highest figures 
were maintained only for a very short time. An¬ 
thracite foundry pig iron, which had fallen to 
$16.50 in November, 1878, rose to $41.00 in Febru- 

* This is why the price of iron is tabulated each month — as a barometer 
for forecasting changes in general business; although — as will be seen 
from a chart in the earlier part of this book — commodity prices do not 
reach a minimum as a rule until one or two years after the stock market 
reaches its low point. 


COMMODITY PRICES 


361 


ary, 1880; rolled bar iron to $85.12 in the same 
month; steel rails to $85; cut nails to $5.25 in the 
months of February and March. After the month 
of March, 1880, there was a sharp decline, though 
interrupted by numerous fluctuations. A steady 
decline began ^fter the closing months of the year 
1882, and continued until another minimum was 
reached in the summer of 1885. The crisis of 
May, 1884, occurred in the midst of this downward 
movement and seems to have exerted but little in¬ 
fluence upon the iron market. Anthracite foundry 
pig iron fell to $17.75 in the months of June, July 
and August of 1885 and then began to rise. Rolled 
bar iron fell to $40.30 in May of the same year, 
and then was quoted at $40.32 for the remaining 
months-of the year. Steel rails fell to $26 in the 
month of April. 

“ After the minimum point in 1885, there was an 
upward movement continuing until the earlier 
months of 1887, the months of February and March 
of that year showing maximum prices in most varie¬ 
ties of iron and steel; this maximum was succeeded 
by a fall in the prices, which for most varieties 
reached a minimum in May and June, 1889. This 
minimum was followed for a short time by rising 
prices, which reached a maximum in 1890. In the 
two decades after the maximum prices of 1880, the 
trend of prices differed from that in the preceding 
decade. Fluctuations were much more frequent 
and for nearly eighteen years the general tendency 
was downward, though interrupted by brief revivals 
in prices in the years 1882, 1886, 1887, 1890 and 


362 


BUSINESS BAROMETERS 


1895. The rise in price which occurred in 1887 and 
other years proved to be greater than the increased 
demand would sustain. The general statement 
may be made that during this long period between 
1880 and 1897, in fact until 1898, for there was only 
a slight rise in that year and the average price of 
several forms was less than in 1897, the demand 
did not keep pace with the increasing supply, and 
improvements in production were constantly exert¬ 
ing their influence. The increase in price in the 
United States in 1887 was greater than in other 
countries. The reason for the difference may be 
found in the exceptional demands in the year 1887, 
in which year occurred the most extensive railway 
building and the greatest consumption of steel 
rails. There was an exceptional deficiency in the 
home supply. There was also a revival of general 
activity in this country, the effect of which was 
conspicuous. It should be further noted that the 
crisis of this decade was much less severe than that 
of 1873, and the downward movement succeeding 
it, though long continued, manifested less decline 
in prices. 

“ After the high prices of 1890, there was a fall 
which continued until the month of July, 1897. 
This fall was more uniform than those after 1880 
and 1887. It was interrupted only by a temporary 
revival beginning after April, 1895, and continuing 
until the latter part of the year.” 

Beginning in July, 1897, prices show an upward 
tendency, but increases were slight until the begin¬ 
ning of 1899; then there was a very rapid rise until 


COMMODITY PRICES 


363 


the latter part of the year, which continued, with 
the exception of a very slight setback in 1903, to 
the depression of 1907-8. 

Again the improved conditions of 1909-10 were 
preceded by a remarkable increase in the price and 
production of iron, followed later by an increase in 
the production of copper and other commodities. 
From the high point of 1909-10, prices of iron and 
steel declined again to a low point in December, 
1911, followed by a rapid advance in 1912. 

In the examination of these price movements 
several marked tendencies appear: 

“ (1). The interval between the date of the maxi¬ 
mum prices and the succeeding crisis is longer in 
the later years. This interval continued for a few 
months prior to the crises of 1825 and 1837, nearly 
a year prior to that of 1873, and several years prior 
to the crises of 1884 and 1893. This longer interval 
may be explained by the greater ability to carry 
accumulated stocks in expectation of a rise, the 
larger influence of speculation, and the absorption 
whenever prices decline, of larger quantities by the 
market now existing.” 

These influences explain another tendency, viz.: 

“(2). In later years fluctuations are more fre¬ 
quent. In the period after the downward price 
movement has commenced the market price breaks 
and then is restored again. It is evident that 
abundant capital for construction is waiting for 
investment and even in case of a slight decline, pur¬ 
chases are large and tend to bring prices to the 
former level. 


364 


BUSINESS BAROMETERS 


“(3). Since 1873 the maximum price reached in 
each upward swing tends to be less than that in 
the preceding rise. This is due to invention, to 
the lower cost of manufacturing on a large scale, 
and improvements of transportation. This ten¬ 
dency to lowet prices is a part of the progress of the 
time and an essential feature in each depression. 

“(4). The upward movement of prices continues 
for a much shorter time than the downward move¬ 
ment. The upward movement preceding the maxi¬ 
mum of October and November, 1872, continued for 
one year and nine months. The succeeding down¬ 
ward movement lasted until November, 1878, or 
six years and one month. Then an upward move¬ 
ment continued until February, 1880, or one year 
and three months; the succeeding downward move¬ 
ment lasted approximately five and one-half years, 
to the summer of 1885, to be followed by a rising 
movement interrupted in the United States in 1888 
and 1889, of four and one-half years, or until 
January, 1890. It is to be noticed, however, that 
the rise in most grades of iron and steel for a year 
after the summer of 1885 was very slight. After 
January, 1890, the downward movement continued 
for seven and one-half years, to July, 1897, when 
prices for a year were almost stationary, to be fol¬ 
lowed by rising prices, which continued until the 
end of 1899 or less than a year and a half. 

“(5). The rapid rise which precedes a maximum 
price rarely continues for more than a year. If we 
take anthracite and Bessemer pig-iron as the best 
standard, it will be noticed that prior to the maxi- 


COMMODITY PRICES 


365 


mum price of anthracite, September, 1872, prices 
rose from $37 in January of that year; prior to the 
maximum of $41 in February, 1880, prices had risen 
rapidly from $20.75 in August, 1879, or for six 
months; prior to the maximum of $19.90 in January, 
1890, there was a rise from $17 in May, 1889, or for 
eight months; prior to the maximum of $25 for 
Bessemer pig-iron in December, 1899, there was a 
rapid rise from $11 in January of the same year, or 
for eleven months. In many respects, the rise in 
1899 was the most remarkable of all, because it had 
been considered by iron manufacturers in the pre¬ 
ceding years that the equipment for production was 
sufficient to properly meet any increase of demand, 
and yet the rapid rise in that year was unprece¬ 
dented. The great increase in the price of iron and 
steel in that year, with the steady increase in pro¬ 
duction after 1894, proves the more general use of 
these products for a greater variety of purposes 
and over an enlarged area.” 

For a general study of prices, Bradstreet’s Index 
of American prices and the London Economist’s 
Index of English prices, should be tabulated or 
plotted at regular intervals. It will be noticed 
in studying commodity prices, that the fall after a 
year of panic, curtailment and depression is usually 
considerably less than the preceding rise. For 
this fact there are several reasons: 

First. The continuous increase in the amount 
of active circulating medium. In normal condi¬ 
tions money is valued only as a means of purchasing 
goods. A certain amount must be kept as “ till- 


366 


BUSINESS BAROMETERS 


money ” and for bank reserves. People only hoard 
money when they become frightened. Hence, an 
increased supply of money is ordinarily reflected in 
an increased demand for goods, resulting in higher 
prices (since there is no corresponding increase in 
the supply of goods offered). 

The output of gold which is being supplied at the 
rate of over one million dollars per day* is directly 
responsible for much of the steady increase which 
has taken place in the world’s stock of money. 
Indirectly, it forms the basis for credit expansion, 
the effect of which is even more important. The 
financial history of the past sixty years has been 
characterized by a great expansion in the use of 
credit instruments. Bank notes, treasury notes 
and bank deposits, subject to check, act as a me¬ 
dium of exchange and thus perform the functions 
of money. Most checking deposits are created by 
loans made to enable the borrower to purchase 
goods, and therefore this credit money has the 
same effect on prices as the same amount of specie. 

Second. Another effect in maintaining high 
prices is the growing pressure of population on the 
land supply. The best mining and agricultural 
opportunities of the new world have been occupied. 
The insistent demand for raw material to clothe, 
feed, house, educate and amuse the steadily in¬ 
creasing population is continually forcing resort to 
less advantageous sites. These yield their product 
only- at a higher cost per unit. 

* See Prof. Irving Fisher’s studies on the decrease in the purchasing 
power of the gold dollar. 


COMMODITY PRICES 


367 


A given area of land can be made to yield more 
grain per acre only by the use of more fertilizer 
or more thorough cultivation. After a certain 
point is passed, additional product per acre can 
be obtained only at a disproportionate additional 
outlay in labor or capital, or both. This will not 
be undertaken unless the price of the products 
is sufficient to justify it. The resort to poorer 
lands, and lands farther from the market will be 
undertaken only under the same condition. 

Broadly speaking, mining, the other great de¬ 
partment of extractive industry, is governed by the 
same general principle. It is true that new and 
rich ore deposits are discovered from time to time, 
but the operation of extracting the product from 
known mines proceeds in a manner practically 
similar to the method of agriculture. Those de¬ 
posits are worked first that can be worked at the 
lowest per-unit cost, and as these are exhausted, 
it becomes necessary to dig deeper into the ground, 
to- extend operations to less easily accessible teri- 
tory, or to resort to poorer grade of ore. Increas¬ 
ing demand is thus constantly forcing prices to 
higher levels. 

Third. The maintenance of high prices is in 
part due to the rise of the standard of living which 
a period of increasing wealth first produces, and 
then establishes with a resisting power that even 
in times of depression resists with a new force 
any recession in its newly gained advantages. 

Fourth. There is a final factor behind existing 
price levels in the forms of the wastes due to war 


368 


BUSINESS BAROMETERS 


and the maintenance of great armaments, and in 
the millions of misdirected capital which have 
helped to enhance the costs of profitable production. 

Therefore, the price of commodities is one of the 
best of business barometers and all merchants and 
bankers systematically tabulate each month the “Index 
Number ” compiled by Bradstreet or others, supple¬ 
mented with figures on the price of iron, copper, cotton, 
etc. Such figures especially interest bankers since 
much more money is needed to finance a given volume 
of business with high prices than with low prices. 
Therefore, an increase in interest rates usually follows 
a decided advance in commodity prices. 

The following conclusions are suggested relative 
to “ Commodity Prices.” 

1. During a Period of Business Depression. 

(a) An increase in commodity prices during a 
period of depression, after a period of low commodity 
prices, signifies that the depression has come to an 
end and improvement has begun, provided such an 
increase has been preceded by a distinct decrease. 

(b) A decrease in commodity prices is normal 
and signifies no improvement. 

(c) No change calls for caution. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase following a decrease signifies 
continued improvement. 

(b) A decrease signifies a temporary check to 
improvement. 

(c) No change calls for caution. 


COMMODITY PRICES 


369 


3. During a Period of Over-expansion. 

(a) A great increase in commodity prices 
signifies no further improvement, and is one of 
the signs of the end of this period. 

(b) A decrease is very unusual and should be 
carefully investigated. 

(c) No change calls for caution. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase is not unusual as commodity 
prices sometimes continue to increase about one 
year after the decline in stocks takes place. Such 
an increase, however, clearly signifies that no im¬ 
mediate improvement may be expected. 

(b) A decrease signifies that the period of 
decline is progressing satisfactorily and may fore¬ 
cast an improvement. 

(c) No change is normal at the beginning of 
this period. 

Students desiring a popular discussion of this 
subject are advised to read the report published 
by the State of Massachusetts on the “ Increased 
Cost of Living ” in May, 1910,— Robert Luce, 
Esq., Chairman. 

The most scientific discussion of prices may, 
however, be found in Prof. Irving Fisher’s book, 
entitled “ The Purchasing Power of Money,” pub¬ 
lished by Macmillan & Co., New York. Professor 
Fisher deserves the very highest commendation 
for his original researches along these lines. 


CHAPTER VIII 

SUBJECTS RELATING ESPECIALLY TO INVEST¬ 
MENT CONDITIONS 
STOCK EXCHANGE TRANSACTIONS 

T HERE are three features in connection with 
the New York Stock Exchange which are 
of value in forecasting business conditions. 
They are as follows: 

1. The Quotations. 

2. The Transactions. 

3. The New Securities listed. (See section 
entitled “ New Securities,” page 376.) 

QUOTATIONS 

When studying the quotations, only a long pe¬ 
riod of time showing the general tendency should be 
considered. The fluctuations from day to day are 
of no value whatever, nor are the swings covering 
only a period of a few weeks. A study, of the 
general tendency of the market, however, is of con¬ 
siderable value in forecasting business conditions. 

If the highest point of each successive swing is 
higher than the high point of the preceding swing, 
and if the low point of each successive swing is 
not so low as that of the preceding swing, then 
the tendency of the market is upward. If the last 
high point and the last low point are lower than the 
high points and low points of earlier periods, then 
the tendency of the market is downward. 

In order to study this matter intelligently, a plot 
should be made of the average prices of the leading 



In place of the chart of ten stocks back to 1875 referred to in the text, we have substituted 20 railroad stoc 
from 1860 through 1896, and 20 railroads and 12 industrials from 1896 to 1914. Beginning in 1914 the chart is based 
on the 20 rails and 20 industrials used on the Babsonchart. The bond chart represents 10 high-grade rail, oad issu ^ 
Tom 1860 to 1903 ; from 1903 to date the chart represents our list of 20 bonds. Of course, it has been necessary to 
—substitutions in the issues used. 











































































































































































































































































































































































































































STOCK EXCHANGE QUOTATIONS 371 


railroad and industrial stocks. Up until recently 
the rails have been the leading stocks in the market 
and their fluctuations have best indicated the 
market trend. The range of prices since 1860 of 
ten leading railroad stocks is given in Chapter II. 

The Wall Street Journal publishes an average 
which is widely used as indicating the trend of the 
market. This list contains 40 stocks, 20 industrial 
stocks? American Can; American Car & Foundry; 
American Locomotive; American Smelting; Ameri¬ 
can Sugar; American Tel. & Tel.; Anaconda; 
Baldwin Locomotive; Central Leather; Corn 
Products; General Electric; Goodrich; Rep. Iron 
& Steel; Studebaker; Texas Co.; U. S. Rubber, 
U. S. Steel; Utah Copper; Westinghouse; Western 
Union; and 20 active railway stocks: Atchison; 
Baltimore & Ohio; Canadian Pacific; Ches. & 
Ohio; C. M. & St. P.; Delaware & Hudson; Erie; 
Illinois Central; Lehigh Valley; Louis. & Nash.; 
Kansas City So.; N. Y. Central; New Haven; 
Southern Pacific; Southern Ry.; Norfolk & West¬ 
ern; Northern Pacific; Penn.; Reading and Union 
Pacific. 

As an aid in determining the tendency of the 
market, merchants make a dot at the center of 
each movement, or midway between the high point 
and the low point of each main swing. These dots 
are then connected with a line and this line shows 
at a glance the tendency of the market. 

When two or three plots are made, it is interest¬ 
ing to compare a railroad plot with one for in¬ 
dustrials. Up until about 1911 or 1912 the railroad 


372 


BUSINESS BAROMETERS 


quotations almost always preceded the industrials 
either up or down. Since that time, however, the 
reverse has been true. Space does not permit a 
detailed account of the reasons for the change, so 
it must suffice to state that a change in conditions 
may sometimes be discerned more quickly by 
having the two plots, one for railroads and the 
other for industrials, than if both are averaged 
together on the one plot. 

Another interesting plot is that for bond prices, 
and the following twenty are those which we have 
compiled and which we use as an index of this 
market: 

Highest Grade Bonds — Atchison, Top. & S. Fe Gen. 4’s; 
Balt. & Ohio g. 4’s; Chic., Burl. & Q. Gen. 4’s; Louis. & 
Nash. un. 4’s; N. Y. Central 33^’s; Nor. & West 1st 4’s; 
Nor. Pacific p. 1. 4’s; Penn. Cons. 43^’s; So. Pacific 1st ref. 
4’s; Union Pacific 1st 4’s. Second Grade Bonds — Atchison 
adj. 4’s; Ches. & Ohio Gen. 43^’s; Chic., R. I. & Pacific Gen. 
4’s; Col. & So. ref. 4l#s; Denver & Rio G. 1st. Cons. 4’s; 
Erie p. 1. 4’s; K. C. So. ref. 5’s; St. L., I. M. & So. Gen. 5’s; 
So. Ry. 1st Cons. 5’s; Va. Ry. 1st 5’s. 

Usually, a change in the bond market precedes 
a change in the stock market. The New York 
Times publishes a useful average of the prices of 
50 stocks and 40 bonds. 

If considered in a conservative manner, the 
tendency of the stock market is very interesting to 
merchants when endeavoring to forecast business 
conditions. This is due to the fact that a change in 
the stock market is often the first visible sign of a 
change in general business conditions. Railroad 
earnings are absolutely dependent upon business 
conditions, and stock market quotations are de- 


STOCK EXCHANGE TRANSACTIONS 373 


pendent upon anticipated earnings. Therefore, a 
rising market over a certain period of time, means 
that the majority of operators believe that funda¬ 
mental conditions are more sound, while a falling 
market means that these operators believe that 
fundamental conditions are unsound and unsatis¬ 
factory. In other words, a study of the stock 
market gives one a composite idea of the opinions 
of the ablest bankers and brokers. This is the 
reason why the stock market often turns to go down 
while railroad earnings are increasing, and often 
turns to go up while railroad earnings are still de¬ 
creasing. Therefore, the one who makes the most 
is not only the one who guesses right, but the one 
who makes the right guess first. For this reason 
stock market movements are the first public sign of 
a marked change in fundamental business condi¬ 
tions. All plots of prices should, however, be sup¬ 
plemented by a plot of what the given stocks yield in 
order to allow for the changes in dividend rates. 

TRANSACTIONS 

A study of “ Quotations,” without due consid¬ 
eration of “ Transactions,” is of little value, be¬ 
cause a rising market, during which only a few 
shares change hands, means very little, as such 
a market may be the result of manipulation. In 
the same way a falling market, when only a few 
shares change hands, may niean very little. In 
order to reach a correct conclusion, the “ quota¬ 
tions ” should be considered in connection with the 
“ volume.” 


374 


BUSINESS BAROMETERS 


The volume of transactions is usually largest at 
about the culmination of a long swing bull move¬ 
ment, and during severe liquidation. Between 
these points, however, the variations in volume are 
less significant. It is believed by many market 
traders that, in the trading from day to day, when 
the volume of transactions diminishes as prices fall 
off, and then increases as prices rise, that this 
shows the real trend of the market to be upward. 
On the other hand, when the volume is heaviest 
on the down grade and lighter on the rallies, a 
general decline may be expected. 

There is probably some truth in this idea, but 
such matters are subject to manipulation to such 
an extent that one can never safely trust to such 
surface indications. Manipulation is always pres¬ 
ent, and there are always pools and individual 
operators trying to put the market up or down 
as suits their interest. Certain of these are said 
at times to control the market. Though hard 
to prove, this is probably true as regards many of 
the minor movements and short swings. 

Yet no pool or group of operators, however 
strong, can hold up a market indefinitely, when 
fundamental conditions are against them, nor can 
they prevent a rise (though they may delay it) 
when fundamentals are right for a real improve¬ 
ment. Of course those operators who foresee 
aright and who conduct their operations in har¬ 
mony with fundamental conditions reap great 
profits, and in the popular gossip are often credited 
with causing the movement. The merchant or 


STOCK EXCHANGE TRANSACTIONS 375 


investor, or the conservative speculator, basing 
his purchases and sales on a careful study of funda¬ 
mental statistics, and playing for the long swings 
only, had better not pay too much attention to 
transactions, or worry himself trying to solve the 
mysteries of manipulation. 

The following conclusions are suggested relative 
to “ Stock Exchange Prices.” 

1. During a Period of Business Depression. 

(a) An increase is a distinctly favorable sign 
that better trade conditions may be expected. 

(b) A decrease is a sign that continued dull¬ 
ness may be expected. 

(c) No change signifies uncertainty. 

2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies no improvement. 

(c) No change signifies temporary uncertainty. 

3. During a Period of Over-expansion. 

(a) A great increase usually is a very unfa¬ 
vorable sign and calls for caution. 

(b) A great decline calls for caution. 

(c) No change signifies temporary uncertainty. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies a temporary halt in 
the decline. 

(b) A decrease forecasts further depression. 

(c) No change signifies temporary uncertainty. 


376 


BUSINESS BAROMETERS 


NEW SECURITIES 

The reason for studying the subject of “ New 
Listings ” may be understood by a review of the 
three following laws of economics: 

1. During a Period of Over-expansion, as the 
number of new companies, new promotions and new 
securities listed increases, the danger of a panic in¬ 
creases and the time between said Period of Over¬ 
expansion and a future Period of Depression de¬ 
creases. 

2. When the number of new promotions, new com¬ 
panies and new listings is at a minimum, financial 
depression is sure to be reaching an end. 

3. As the number of new companies, new promo¬ 
tions and new listings increases from a minimum, the 
gradual increase is a sign of improved conditions until 
the normal number of new companies, new promo¬ 
tions and new listings is reached, after which an in¬ 
crease again becomes a source of danger. 

Out of the list of Statistical Tables and Charts 
subjects of which this book treats, this one, “ The 
Number of New Companies and New Promotions ” 
is the one by which it was most clearly possible to 
forecast the panic of 1903. For this reason this 
panic was said to be due to “ undigested securities ” 
and was known as “ The Rich Man’s Panic.” 

Of course one cannot rely upon the study of this 
one subject, as many panics have taken place when 
the figure for “ New Securities ” has been normal 
and the change in conditions could only have been 
forecasted by a study of the other subjects. In 
fact, the difficulty in studying this subject is that 


NEW SECURITIES 


377 


the figures remain very constant for a long period 
of time, and it is only the great movements up or 
down which are of any use. 

Under normal conditions a study of this subject 
is of little value, but it is most useful under ab¬ 
normal circumstances. If we are in a period of 
depression and we reach a period where no new 
companies are incorporated and there are absolutely 
no new promotions or listings, we may be sure of 
better conditions in the near future. Conversely, 
if we are in a period of prosperity and there are an 
abnormally large number of promotions, an abnor¬ 
mally large number of new corporations being 
formed and new securities being listed, we may be 
absolutely sure of trouble. This usually comes 
first in the form of tight money, followed immedi¬ 
ately by a decline in the bond and stock market, 
and later by a period of depression in business 
conditions. 

The following figures clearly show this, particu¬ 
larly in connection with the panic of 1903: 


Stocks: Total Value 
Including New Capital, 


Bonds: Total Value 
Including New Capital, 
Year Old and Refunding Issues 


Year Old and Refunding Issues 


1885 $ 56 , 913,116 

1886 329 , 469,350 

1887 270 , 053,550 

1888 248 , 228,275 

1889 259 , 649,774 

1890 437 , 992,330 

1891 188 , 914,954 

1892 237 , 036,105 

1893 198 , 245,261 

1894 251 , 193,003 

1895 143 , 373,970 

1896 590 , 732,215 

1897 502 , 974,891 


1885 $ 197 , 259,000 

1886 238 , 097,690 

1887 343 , 477,321 

1888 511 , 002,218 

1889 389 , 720,000 

1890 684 , 867,879 

1891 287 , 645,700 

1892 317 , 861,500 

1893 288 , 803,400 

1894 309 , 804,600 

1895 257 , 275,400 

1896 582 , 286,700 

1897 357 , 415,902 


378 BUSINESS BAROMETERS 


Stocks: Total Value 
Including New Capital, 
Year Old and Refunding Issues 

1898 $528,153,996 

1899 704,172,605 

1900 620,935,000 

1901 1,642,013,715 

1902 784,032,595 

1903 426,890,295 

1904 175,866,800 

1905 533,434,900 

1906 662,769,450 

1907 576,032,050 

1908 513,927,450 

1909 1,325,526,485 

1910 1,239,501,545 

1911 643,614,830 

1912 1,161,030,790 

1913 611,993,230 

1914 571,796,360 

1915 939,326,240 

1916 967,161,758 

1917 1,481,285,345 

1918 312,024,647 

1919 1,266,634,492 

1920 2,155,398,653 

1921 1,099,723,686 

1922 2,784,025,366 


Bonds: Total Value 
Including New Capital, 
Year Old and Refunding Issues 

1898 $700,064,680 

1899 525,384,240 

1900 443,713,000 

1901 923,010,100 

1902 a533,519,300 

1903 581,288,800 

1904 535,079,600 

980,026,650 
b571,898,500 
420,813,000 
872,958,000 
1,098,956,500 
808,162,500 
580,834,400 
654,977,750 
648,066,100 
488,993,000 
541,192,300 
1,829,186,000 
1,626,853,550 
227,634,700 
321,002,540 
438,894,706 
795,910,078 
1,582,422,450 
4% Certificates $1,155,- 


(a) Does not include Imperial Russian State 
000 000. 

(b) Does not include $425,000,000 Japanese Government Bonds. 


1905 

1906 

1907 

1908 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

1921 

1922 


Therefore all the merchants systematically tabu¬ 
late each month the amount of new securities admitted 
to the list , although the “ stock ” and “ bonds ” are 
added; thus avoiding the necessity of two tables. 

The following conclusions are suggested relative 
to “New Securities.” 


1. During a Period of Business Depression. 

(a) An increase signifies improvement. 

(b) A decrease signifies no improvement. 

(c) No change signifies nothing important. 


CROP CONDITIONS 


379 


2. During a Period of Improvement Following a 

Period of Business Depression. 

(a) An increase signifies continued improve¬ 
ment. 

(b) A decrease signifies no improvement. 

(c) No change calls for caution. 

3. During a Period of Over-expansion. 

(a) An increase, especially if great, is a sign 
of the culmination of the period of prosperity. 

(b) A decrease tends to lengthen this period 
of prosperity and thus signifies continued im¬ 
provement. 

(c) No change usually calls for caution. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies no improvement. 

(b) A decrease indicates that conditions are 
naturally adjusting themselves. 

(c) No change signifies no improvement, if 
large issues are still being offered, but otherwise it 
shows nothing of importance. 

CROPS AND PRODUCTION OF COMMODITIES 
This subject does not now hold the same rela¬ 
tive importance in the study of Fundamental 
Statistics that it once held when statistics on other 
topics were less carefully compiled. But the con¬ 
dition of the standing crops will always be inter¬ 
esting and valuable as a barometer inasmuch as 
the full annual harvest of the grains and cotton is 
one of the factors at the bottom of American busi¬ 
ness prosperity. Of all subjects studied by the 


380 


BUSINESS BAROMETERS 


merchant and investor it is the only one which the 
government attempts to forecast. Figures on 
banking conditions, labor conditions, imports and 
exports are accumulated by the government and 
are valuable as a matter of history; but for none of 
these subjects is there any official attempt to use 
the figures for forecasting conditions. 

But in the subject of crops, not only does the 
government publish a report on their amount and 
condition in various stages from planting to the be¬ 
ginning of harvest, but it makes a prediction for the 
benefit of business interests of what the total crop 
is likely to be. It has been well proved that this 
forecast made by the government is better than 
any forecast which at the present time can be made 
by any association of merchants or bankers inde¬ 
pendently. 

For this reason the method of compiling and 
distributing these forecasts should be clearly under¬ 
stood and the following is a detailed explanation 
thereof: 

“ The title of the Bureau in charge of the prepa¬ 
ration of crop reports is the ‘ Bureau of Agricul¬ 
tural Economics.’ This Bureau has been formed 
by a consolidation of three former branches of the 
Department of Agriculture: The Bureau of 
Markets; the Bureau of Crop,Estimates; and the 
offices of Farm Management. The former Bureau 
of Crop Estimates is now the Division of Crop 
and Livestock Estimates and continues the work 
of preparing the Government crop and livestock 
reports with, as formerly, a field force to collect 


CROP CONDITIONS 


381 


information and an office force of tabulators and 
computors. 

“ Statistical information concerning crop produc¬ 
tion and live stock that is collected by the slow 
and exact methods of a census is generally not given 
to the public until after the crops enumerated are 
harvested and marketed and the immediate inter¬ 
est in it has passed away. Prices of agricultural 
products are primarily governed by the law of 
supply and demand; therefore early information 
concerning the supply is of value to all. Those 
who produce and those who consume are vitally 
interested as well as the dealer who stands between 
them. The relations and mutual interests of agri¬ 
culture, manufacture, and commerce demand that 
there should be published at brief intervals during 
the crop season reliable information on the condi¬ 
tion, acreage, production, and value of the princi¬ 
pal crops, by States and agricultural areas. 

“ As commerce consists largely in an exchange of 
the products of agriculture and manufacture among 
their respective producers, commerce thrives as 
the farmer and the factory operative prosper. 
Some individuals, however, do not always regard 
the common welfare, and injurious commercial 
speculations occur when ignorance prevails concern¬ 
ing the condition of our crops and the true rela¬ 
tions of supply and demand. At such times the 
farmer often does not obtain just prices, while the 
consumer derives no benefit and business is inju¬ 
riously affected. The consequences of false re¬ 
ports concerning the condition and prospective 


382 


BUSINESS BAROMETERS 


yield of the cotton crop alone may be very injurious. 
If there were no adequate government crop-report¬ 
ing service, and by misleading reports speculators 
should depress the price a single cent per pound, the 
growers would lose $70,000,000 or more; if the 
prices were improperly increased, the manufac¬ 
turers and allied interests would be affected to a 
proportionate degree. All interests therefore de¬ 
mand that the true condition of crops should be 
made known promptly, and harmful speculation 
discouraged. 

“ The Bureau of Agricultural Economics issues 
each month detailed reports relating to agricultural 
conditions throughout the United States, the data 
upon which these facts are based being obtained 
through a special field service, and through a large 
body of voluntary correspondents, composed of the 
following classes: county correspondents, township 
correspondents, field aids, individual farmers, and 
special cotton correspondents. 

“ The field service relating to crop reporting has 
forty offices in different parts of the country with 
an agricultural statistician in charge of each. It 
has also a number of assistant agricultural statis¬ 
ticians, livestock statisticians and investigators, 
truck crop specialists, etc. These officials are es¬ 
pecially qualified by statistical training and prac¬ 
tical knowledge of crops. They systematibally 
travel over their territories, carefully note the de¬ 
velopment of each crop, keep in touch with the 
best informed opinion, and render written and 
telegraphic reports monthly and at such other 


CROP CONDITIONS 


383 


times as required. Each statistician has a large 
number of crop reporters in his state or territory 
who report to him monthly or oftener on crop 
conditions, etc. 

“ There are approximately 2,800 counties of ag¬ 
ricultural importance in the United States. In 
each of these counties the Department has a prin¬ 
cipal county correspondent who maintains an 
organization of several assistants. These county 
correspondents are selected with special reference 
to their qualifications and constitute an efficient 
branch of the crop-reporting service. They make 
the county the geographical unit of their reports, 
and after obtaining data each month from their 
assistants and supplementing these with informa¬ 
tion obtained from their own observation and 
knowledge, report directly to the Department at 
Washington. 

“ In the townships and voting precincts of the 
United States in which farming operations are 
extensively carried on, the Department has town¬ 
ship correspondents who make the township or 
precinct the geographical basis of reports, which 
they also send directly to the Bureau of Crop 
Estimates each month. Finally, at the end of the 
growing season, a large number of individual 
farmers and planters report on the results of their 
own individual farming operations during the year; 
and valuable data are also secured from about 
30,000 mills and elevators. 

“ With regard to cotton, all the information 
secured from the foregoing sources is supplemented 


384 


BUSINESS BAROMETERS 


by that furnished by special cotton correspondents, 
embracing a large number of persons intimately 
concerned in the cotton industry, and, in addition, 
inquiries in relation to acreage and yield per acre 
of cotton are addressed to the list of cotton ginners 
through the courtesy of the Bureau of the Census. 

“ Eleven monthly reports on the principal crops 
are received yearly from each of the agricultural 
statisticians, crop specialists, county correspon¬ 
dents, and township correspondents, and one re¬ 
port relating to the acreage and production of 
general crops is received durihg the year from 
individual farmers. 

“Six special cotton reports are received during 
the growing season from the cotton crop specialists, 
agricultural statisticians, the county correspon¬ 
dents, and from township correspondents. The 
first and last of these reports relate to the acreage 
and production from individual farmers, special 
correspondents, and cotton ginners. 

“ The general reports for January and February 
are combined on one schedule and relate to the 
number and value of farm animals. 

“ The general report for March relates to the 
stock of grain in farmers’ hands. The percentages 
of the last year’s crops of corn, wheat, oats and 
barley remaining on the farms and shipped out of 
the county where grown and the per cent of the 
last year’s corn crop that was of merchantable 
quality. 

“ Reports on the condition of the crops of the 
year begin with the April report, when the con- 


CROP CONDITIONS 


385 


dition of winter wheat and rye is dealt with, the 
number of breeding sows and the supply of farm 
labor. 

“ The report for May comes at a time when few 
of the crops are sufficiently advanced for their 
condition to be reported upon; consequently the 
inquiries relative to condition apply only to winter 
wheat, rye, meadow mowing lands, and spring 
pasture. This schedule also deals with the portion 
of the original acreage sown to winter wheat if, for 
any reason, any has been or will be abandoned, the 
percentage plowing and spring planting and sow¬ 
ing done and contains inquiries with regard to the 
mortality and condition of livestock. 

“ The schedule for June deals with the acreage 
of five crops, the most important of which is spring 
wheat. It also covers the condition of wheat, oats, 
barley, rye, all hay, alfalfa, clover, spring pastures, 
apples, peaches, pears, berries, field peas and beans, 
cabbages, onions, melons and sugar beets. 

“ The July schedule deals with the acreage of 
corn, potatoes, tobacco, and timothy, flax, rice and 
sorghum cane for syrup; the stocks of wheat in 
farmers’ hands; the average condition of all the 
principal crops, fruits, vegetables and spring pas¬ 
tures, and the average weight of wool per fleece. 

“ The August schedule deals with the average 
yield of winter wheat, rye and clover hay per acre, 
acreage of buckwheat and hay, the condition of the 
principal crops, vegetables and fruits, the quality 
of clover hay, and the stocks of oats and barley in 
farmers’ hands. 


386 


BUSINESS BAROMETERS 


“ The September schedule deals with the condi¬ 
tion, when harvested, of spring wheat, oats and 
barley; the acreage of clover seed; the production 
and quality of peaches; the average yield per acre 
of hay (tame, wild, timothy and alfalfa), the con¬ 
dition of the principal crops, fruits and vegetables 
and the number and condition of stock hogs on 
hand for fattening. 

“ The October schedule deals with the average 
yield per acre of spring wheat, oats, barley, alfalfa 
seed, field beans, cabbages, onions and broom 
corn, the quality of spring wheat, oats and barley, 
the condition at time of harvest of buckwheat, 
tobacco, rice, flaxseed and clover seed, the condi¬ 
tion of the principal growing crops including corn, 
buckwheat, grain sorghum, sorghum cane for syrup, 
peanuts, apples, pears and grapes. 

“ The November schedule deals with the aver¬ 
age yield per acre of corn for grain, corn for silos, 
buckwheat, potatoes, tobacco, flaxseed; clover and 
grain sorghum, cranberries and peanuts, the percent 
of the corn crop that was of merchantable quality 
and the percent of the last year’s corn crop remain¬ 
ing on the farms; the quality of buckwheat, po¬ 
tatoes, tobacco, flaxseed, apples, grapes, pears, 
cranberries and peanuts; the per cent of potatoes 
grown for market; the total production of apples, 
grapes, pears and cranberries in a percent of a full 
crop and the percent of plowing done for spring 
crops in a percent of the usual. The average 
weight per measured bushel of wheat, oats and 
barley is also dealt with. 


CROP CONDITIONS 


387 


“ The December schedule deals with the produc¬ 
tion and farm prices of all the principal crops, 
and the acreage of winter wheat and rye sown for 
the crop of the following year, and also with the 
condition of winter wheat and rye. It also deals 
with the percent of the apple crop that has been 
shipped; of the county where grown; the yield per 
acre of the various straws; the percent of all farm 
lands plowed in the fall; the wage of male farm 
labor; the average number of cords of firewood 
cut on the farm during the year and the average 
number of cords burned on the farm. 

“ In addition to the foregoing, the reports during 
the past few years have been extended to include 
condition figures of many small fruits, vegetables 
and minor products. Information in regard to 
such products has been urgently requested, and as 
a basis for comparison has now been satisfactorily 
established, the reports are received with interest 
and favorable comment. 

“ Previous to the preparation and issuance of the 
Bureau’s reports each month, the correspondents 
of the several classes send their reports separately 
and independently to the Department at Wash¬ 
ington. 

“ In order to prevent any "possible access to re¬ 
ports which relate to speculative crops, and to 
render it absolutely impossible for premature in¬ 
formation to be derived from them, all of the reports 
from the aforesaid agricultural statisticians are 
sent to the Secretary of Agriculture in specially 
prepared envelopes addressed in red ink with the 


388 


BUSINESS BAROMETERS 


letter “ A ” plainly marked on the ends. By an 
arrangement with the postal authorities these 
envelopes are delivered to the Secretary of Agri¬ 
culture in sealed mail pouches. These pouches 
are opened only by the Secretary or Assistant 
Secretary, and the reports, with seals unbroken, 
are immediately placed in the safe in the Secre¬ 
tary’s office, where they remain sealed until the 
morning of the day on which the reports are 
issued, when they are delivered to the Statistician 
by the Secretary or the Assistant Secretary. The 
combination for opening the safe in which such 
documents are kept is known only to the Secretary 
and the Assistant Secretary of Agriculture. Re¬ 
ports from those agricultural statisticians residing 
at points more than 500 miles from Washington 
are sent by telegraph, in cipher. Those in regard 
to speculative crops are addressed to the Secretary 
of Agriculture. 

“ Reports from the field service in relation to 
non-speculative crops are sent in similar envelopes 
marked “ B,” which go to the Bureau of Crop 
Estimates, and are kept securely in a safe until 
the data contained in them are required by the 
Statistician in computing estimates regarding the 
crops to which they relate. The reports from the 
county correspondents, township correspondents 
and other voluntary agents are sent to the Chief 
of the Bureau of Crop Estimates by mail in sealed 
envelopes. 

“ The plan of intrusting the final preparation 
of reports to a Crop Reporting Board has been con- 


CROP CONDITIONS 


389 


tinued, and after years of trial it has been demon¬ 
strated that such is a satisfactory method. It re¬ 
lieves one man of the strain and responsibility, and 
secures the benefits of consultation and a consensus 
of judgment of men who have been on the ground. 

“ The Crop Reporting Board is composed of the 
Chief of Bureau as chairman, and four other mem¬ 
bers, whose services are brought into requisition 
each crop-reporting day from among the statis¬ 
ticians and officials of the Bureau, and the agricul¬ 
tural statisticians who are called to Washington 
for the purpose. 

“ The personnel of the board is changed each 
month. The meetings are held in the office of the 
Statistician, which is kept locked during sessions, 
no one being allowed to enter or leave the room or 
the Bureau, and all telephones being disconnected. 

“ When the board has assembled, reports and 
telegrams regarding speculative crops fro a the 
agricultural statisticians which have been placed 
upopened in a safe in the office of the Secretary 
of Agriculture, are delivered by the Secretary, 
opened and tabulated. The reports, by States, from 
the several classes of correspondents and agents 
relating to all crops dealt with are brought together 
in convenient parallel columns on final tabulation 
slips. The board is thus provided with several 
separate estimates covering each State and each 
separate crop, made independently by the respec¬ 
tive classes of correspondents and agents of the 
Bureau, each reporting for a territory or geographi¬ 
cal unit with which he is thoroughly familiar. 


390 


BUSINESS BAROMETERS 


“ Abstracts of the weather condition reports in 
relation to the different crops, by States, are also 
prepared from the weekly bulletins of the Weather 
Bureau. With all these data before the board, 
each individual member computes independently, 
on a separate sheet or final computation slip, his 
own estimate of the acreage, condition, or yield of 
each crop, or of the number, condition, etc., of 
farm animals for each State separately. These 
results are then compared and discussed by the 
board under the supervision of the chairman, and 
the final figures for each State are decided upon. 
It has been interesting to note how often the re¬ 
ports of the different classes of correspondents and 
statisticians are nearly identical and how closely 
the figures arrived at independently by the indi¬ 
vidual members of the board agree. The estimates 
by States as finally determined by the board, are 
weighted by the acreage figures for the respective 
States, the result for the United States being a true 
weighted average for each subject. 

“ Reports in relation to cotton, after being pre¬ 
pared by the Crop Reporting Board, and personally 
approved by the Secretary of Agriculture, are issued 
on the seventh or eighth day of each month during 
the growing season, and the reports relating to 
the principal farm crops and live stock are prepared 
and made public on the ninth or tenth day of each 
month. In order that the information contained 
in these reports may be made available simul¬ 
taneously throughout the entire United States, 
they are handed, at an announced hour on report 


CROP CONDITIONS 


391 


days, to all applicants and to the Western Union 
Telegraph Company and the Postal Telegraph 
Cable Company, who have branch offices in the 
Department of Agriculture, for transmission to the 
exchange and to the press. These companies have 
reserved their lines at the designated time, and 
forward immediately the figures of most interest. 
A mimeograph or multigraph statement also con¬ 
taining such estimates of condition or actual pro¬ 
duction together with the corresponding estimates 
of former years for comparative purposes, is pre¬ 
pared and sent immediately to exchanges, news¬ 
paper publications and individuals. The same 
afternoon data concerning principal crops in each 
State and totals for the United States are tele¬ 
graphed to the Weather Bureau Station director 
in each State, and the information is printed and 
issued immediately to all the local papers of the 
State, thus insuring wide publicity to the crop 
reports within a few hours of their issuance at the 
Washington office. 

“ Promptly after the issuing of the report, it, 
together with other statistical information of value 
to the farmer and the country at large, is published 
in ‘ Weather, Crops and Markets/ a publication of 
the Bureau of Agricultural Economics, under the 
authority of the Secretary of Agriculture. An 
edition of many thousand copies is distributed to 
the correspondents and other interested parties 
throughout the United States each month. Thus 
the information is spread broadcast.” 

As the government crop statistics are necessary 


392 


BUSINESS BAROMETERS 


and valuable as business barometers, so figures 
showing the production of leading commodities are 
of intense interest. 

The production of iron, for example, reported 
by the two leading weeklies on the subject, is a 
very important factor in determining present condi¬ 
tions and forecasting future conditions. This was 
especially true before the United States Steel Cor¬ 
poration was formed and to a large extent is also 
true today. Figures regarding pork, copper, wool, 
coffee, rubber, sugar and other commodities are 
also of interest. A decrease in the production of 
commodities is always accompanied by a decrease 
in activity, which means that men and capital are 
idle. This reduced activity, if pressed beyond a 
certain point, will result in a crisis followed by a 
period of depression. 

A large part of the income of the railroad lines is 
derived from the shipments of grain, produce and 
cotton. A total of 78,736,587 tons of agricultural 
products was given to the roads from their own 
territory in the year 1910; of this tonnage, grain 
contributed 37,420,965 tons, flour and other mill 
products nearly 15,000,000 tons more, and cotton 
*1,023,757 tons. Some idea Qf the great volume of 
this agricultural product appears in the realization 

the fact that it represents over 8% by weight of 
the total freight originating along the line of the 
railroads; while the entire soft coal tonnage origi¬ 
nating on these traffic lines which is expected to be 
very large is only 257,460,017 tons, or about 33% 
of the total freight. 


PRODUCTION OF COMMODITIES 


393 


It is, therefore, not to be wondered at, that in 
times that are dull in the manufacturing world, or 
in the general trade, great wealth may be brought 
to the railroads, and through them to the nation, 
by the moving of successful crops. Years of very 
rich harvests, such as 1906 and 1912, may increase 
enormously the revenue of every railroad in the 
country. 

If the good years have such an effect on the 
general prosperity of the United States, it is not 
surprising to see the tide turned in the opposite 
direction by a yield below the average. Crop values 
reach more than $3,000,000,000, and a fluctuation 
of $500,000,000, or over in this great total has in 
every way a wide-spreading effect on the business 
of the country. Even partial crop failures may 
result at once in a depression, and bumper crops 
may boom a stock market as no other influence 
has power to do. This influence operates especially 
through its effect on railroad earnings and on the 
export trade. Full crops yield a surplus for export 
and help pay a nation’s debt; they may create a 
credit and turn an adverse gold movement into a 
favorable balance and increased imports of gold. 
Viewed from all parts then, the progress of the crops 
and the study of crop statistics should be regarded 
as of the utmost importance. 

The profits, and therefore the stocks of railroad 
companies, which operate through the grain and 
cotton sections, are affected in the most direct and 
powerful manner by the promise of generous or 
stunted crops. Investors need to keep in touch 


394 


BUSINESS BAROMETERS 


with the crop outlook. Wall Street always dis¬ 
counts the future and never waits for earnings to 
be affected actually before adjusting prices to 
what it sees coming. 

A slackening in the investment business comes 
during a great boom and precedes every financial 
crisis; and every investor should be as alert to 
detect the signs of a coming change of importance 
as are the bankers, brokers and stock operators, 
who are continually watching the crops as well as 
the Babsonchart. 

It is axiomatic that all railroads are affected 
directly and seriously by crop conditions and 
industrial stocks peculiarly so. Therefore the 
subject of “ Crops ” is one which requires con¬ 
stant attention, and never more so than when 
a boom or reaction has run on for a number of 
months or years. Conservative merchants and 
investors therefore tabulate each month as pub¬ 
lished, the government estimate of the wheat, corn 
and cotton crops, then in the ground, together with 
the annual figures when the crops have been harvested. 

The following conclusions are suggested rela¬ 
tive to “ Crops and other Commodities * 

1. During a Period of Business Depression. 

(a) Improved crop conditions are often the 
beginning of a period of improvement. 

(b) Poorer crop conditions delay an im¬ 
provement in general business, or signify no im¬ 
provement. 

* The conditions of the crops has direct bearing upon the condition of the 
farmer, and an indirect interest for every investor and merchant. 


RAILROAD EARNINGS 


395 


(c) No change is favorable or unfavorable 
according as to whether this means good crops or 
otherwise. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) Improved crop conditions always give an 
impetus to the general improvement in conditions, 
and thus signify continued improvement. 

(b) Poorer crop conditions usually signify no 
improvement. 

(c) No change is favorable or unfavorable 
according to what it represents. 

3. During a Period of Over-expansion. 

(a) Improved crop conditions tend to lengthen 
the period of prosperity; but bumper crops often 
precede a decline. 

(b) Poor crop conditions tend to shorten said 
period, and signify no improvement. 

(c) No change is favorable or unfavorable 
according to what it represents. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) Improved crop conditions sometimes tend 
to forestall a panic and promote an improvement. 

(b) Poor crop conditions tend to hasten 
said time and perhaps cause" a panic. 

(c) No change is or is not of importance 
according to what it represents. 

RAILROAD EARNINGS 

Railroad earnings are of interest for two reasons: 
first, in forecasting the conditions of the railroads, 


396 


BUSINESS BAROMETERS 


upon which the prices of securities are directly de¬ 
pendent; second, in determining and forecasting 
the condition of general business. 

Although stocks of roads barely earning their 
operating expenses and interest charges are of 
some nominal value simply on account of their 
voting power (and this value is generally considered 
in the vicinity of about $10 per share, par value 
$100), yet railroad stocks as a rule are worth very 
little unless the roads are earning money. But 
whether or not a stock pays a dividend, it is self- 
evident that the prices must vary with the earning 
power. Increased earnings forecast increased 
values for the securities, and reduced earnings 
forecast lower values. Manipulation may tem¬ 
porarily force stocks far above or far below their 
true investment value, but neither high prices nor 
low prices can artificially be maintained for long. 
In the end the prices must adjust themselves 
according to earnings. As most investments are 
either directly or indirectly dependent upon rail¬ 
roads, railroad earnings are of great importance 
to the investor. 

For the purpose of forecasting general business 
conditions, railroad earnings are also of interest. 
As statistics they are so important for this purpose 
that many merchants consider railroad earnings 
second only to bank clearings in making up a 
barometer of actual business conditions. There are 
several reasons for this choice, of which the two 
following are especially well founded: 

(1) Because nearly all bills are paid in checks, 


RAILROAD EARNINGS 


397 


bank clearings serve as a barometer of the total 
amount of sales; but railroad earnings likewise 
serve as a similar barometer, because practically 
all goods purchased or sold are shipped on the rail¬ 
roads. If the freight earnings of the United States 
show an increase, it is very evident that manu¬ 
facturing and commerce are increasing; and the 
same is true conversely, if the freight earnings are 
decreasing. Therefore the earnings of the rail¬ 
roads may be considered in the same manner as the 
clearings of the banks, especially when “ tonnage/’ 
rather than cash receipts is considered. 

(2) Another important reason is that not only 
are railroad conditions a barometer of trade condi¬ 
tions, but to a large extent they are the basis of 
general trade conditions. This is due to the fact 
that the railroads employ so large a proportion of 
the working class population of the United States, 
and that so many industries are absolutely de¬ 
pendent on the railroads for their business. The 
railroads are the best purchasers of contractors’ 
supplies and contract labor; of iron and steel for 
rails and bridges; of lumber for ties and stations; 
of coal for motive power and heating; of oil for 
lighting and lubricating; of printers’ supplies for 
time-tables, tickets, etc., etc. In fact this list 
might be indefinitely extended to show that the 
prosperity of the country is inseparably connected 
with the prosperity of the railroads. 

Therefore, for the above two reasons, the wise 
investor and merchant very carefully watches 
railroad earnings, both for determining the present 


398 


BUSINESS BAROMETERS 


conditions and for forecasting future conditions. 
In this connection the history of railroad earnings 
during the past three depressions may be of inter¬ 
est. During the reaction of 1873 the high level of 
gross earnings was reached in the same calendar 
year as the panic itself, but the recession from this 
high point was fairly evenly spread over the next 
four years. The recovery, on the contrary, was 
strikingly rapid. In 1879, only two years after 
gross earnings had been at their worst, they had 
nearly regained their former high level, and this 
was steadily raised. 

By reducing “maintenance charges,” the net 
earnings increased for a year after the reaction 
began, the gain between 1873 and 1874 having been 
more than three percent. Thereafter net earnings 
declined along with the gross, to their low level in 
1877. In the following two years they recovered 
even more rapidly than gross earnings, making up 
most of their lost ground in one year. The re¬ 
action between the top and bottom levels in net 
earnings was practically 10%, but between the 
years in which the gross receipts sank from top to 
bottom levels, the difference in net was considerably 
less. Moreover, this decrease was accompanied by 
^n increase in mileage of nearly 12%. 

While the panic of 1873 severely checked rail¬ 
road construction, it by no means checked such 
development altogether. This crisis followed one 
of the most pronounced waves of railroad construc¬ 
tion ever witnessed. In two years (1870-72) pre¬ 
ceding the panic, operated mileage increased by 


RAILROAD EARNINGS 


399 


about 13,250 miles, or 25%, which of course is 
always a distinct danger signal. 

The depression of 1884-5 differed from other 
depressions in the relation of operating expenses to 
volume of business. In 1894 the percentage decline 
in net earnings was a trifle less than that of gross; 
but in the 7 80 7 s the lessening volume of traffic was 
not accompanied by a proportionate reduction in 
earnings. The comparison of top and bottom levels 
in this depression follows: 

Mileage Gross Net 

1883 106,938 $807,112,780 $291,587,588 

1885 123,320 772,568,883 269,493,931 

Decrease *16,382 34,543,897 22,093,657 

Percent *15.3 4.2 7.5 

“In so serious a crisis as that of the Ws, the 
maximum reaction in railroad earnings was not 
more than 12%. However, aggregate figures cover¬ 
ing so many railroads of such wide diversity of 
location and condition tend to obscure the facts as 
they apply to individual undertaking. Constant 
addition of new mileage tends to reduce the record 
of damage sustained by the old roads. The reduc¬ 
tion of the figure to a mileage basis would still be 
an inaccurate test, because the earning power of new 
and additional mileage is naturally low. Further¬ 
more, construction of new roads frequently takes 
away business from those roads already in exist¬ 
ence, and thus tends to lower the average earnings 
per mile without any actual decrease in the amount 
of business. A comparison between fat and lean 
years could best be made by using figures for iden¬ 
tical mileage.” 

* Increase. 


400 


BUSINESS BAROMETERS 


Aggregate railroad earnings reached a new high 
level in 1893 and again acted as a distinct danger 
signal, for the crisis itself took place in the second 
half of that calendar year. The reaction in general 
business came the next year, when both gross and 
net immediately reached the low level of that 
movement. The recovery, though slow, was fairly 
continuous throughout five or six succeeding years. 
The extent of the reaction from the top level of 
1893 to the bottom level of 1894 is shown in the 
following figures: 



Mileage 

Gross 

Net 

1893 

175,442 

$1,207,106,626 

$358,648,918 

1894 

178,054 

1,066,943,358 

317,757,399 

Decrease 

*2,613 

140,163,268 

40,891,519 

Percent 

*1.5 

11.6 

11.4 

1907 

224,382 

2,602,757,503 

833,339,600 

1908 

230,085 

2,407,019,810 

717,802,167 


The next high point was reached in 1907, when 
the aggregate mileage increased to 228,128, the 
aggregate gross to $2,602,757,503 and the aggre¬ 
gate net to $833,339,600. This gross and net fell 
off simultaneously with the decrease in business, 
an aggregate total of about 8%, the low point 
having been reached in the latter part of the sum¬ 
mer of 1908. After that time there was a gradual 
improvement up to 1911, when net earnings were 
reduced about 2%. 

It is therefore advisable for merchants and investors 
to watch carefully the reports of the Interstate Com¬ 
merce Commission. These reports include nearly all 
the railroads in the United States and give mileage , 
gross and net earnings. These statistics are published 


* Increase. 


RAILROAD EARNINGS 


401 


monthly and from them the gross and net earnings 
per mile may he computed. 

The following conclusions are suggested relative 
to “ Railroad Earnings.”: * 

1. During a Period of Depression. 

(a) An increase signifies that conditions are 
improving. 

(b) A decrease signifies no improvement. 

(c) No change usually signifies uncertainty. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase signifies that the improve¬ 
ment in conditions is progressing satisfactorily. 

(b) A decrease signifies no improvement, or 
that the improvement is temporarily checked. 

(c) No change signifies nothing definite. 

3. During a Period of Over-expansion. 

(a) A great increase usually signifies the cul¬ 
mination of the period of prosperity. 

(b) A decrease during a period of prosperity 
is practically impossible. 

(c) No change calls for caution. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase signifies no immediate im¬ 
provement can be expected. 

(b) A decrease signifies that conditions are 
rapidly becoming worse. 

(c) No change signifies nothing definite. 

* The tabulation of Railroad Earnings is of great value to the merchant 
but the investor must remember that the stock market declines before 
earnings decline, and that prices begin to increase several months before 
earnings show any increase. 


402 


BUSINESS BAROMETERS 


IDLE CAR FIGURES AND CAR LOADINGS 

Idle car figures are of even more direct interest 
in forecasting business conditions, than are figures 
on “ Railroad Earnings.” In fact, idle car figures 
bear the same relation to railroad earnings as 
Government crop estimates bear to the final figures 
compiled after the crop has been gathered. 

These idle car figures are collected by the Ameri¬ 
can Railway Association which receives every week 
from the officials of each railroad, the balance 
between the number of cars they have available 
and the number of cars required. Although no 
one railroad will report at any given time both a 
surplus and a shortage of any one class of rolling 
stock, it is very natural for some roads in certain 
localities to have a surplus, while other roads in a 
different locality may report a shortage. All of 
the “ surpluses ” and “ shortages ” of twelve 
classes of cars are reported by the Association once 
each week. The net balance between the reports 
of all the roads shows the car situation as a whole. 

It is this balance, namely, the “ net surplus ” or 
“ net shortage ” that the' investor or merchant 
watches after making allowance for a shortage or 
surplus in different parts of the country. It takes 
about six weeks for a car to be taken from a siding, 
looked over, loaded, delivered and unloaded, and 
furnish its revenue. Then as the railroads do not 
publish the earnings of a car for about a month or 
more after received, it may be three months after 
a car is taken from the siding before the earnings 
of that car appear in the monthly statement. 


IDLE CAR FIGURES 


403 


Therefore, by tabulating idle car figures the in¬ 
vestor and the merchant are able to forecast the 
publication of an increase or a decrease in railroad 
earnings almost three months before its appearance. 

Although car loadings are not available as far 
back as idle car figures, they are exceedingly 
valuable, not only in connection with the earnings 
of the roads, but also in studying the business 
situation. 

Each week the American Railway Association 
reports revenue freight loaded, divided as grain, 
live stock, coal, coke, forest products, ore, mer¬ 
chandise in less than carload lots and miscellaneous 
loadings. Not only are the loadings for the differ¬ 
ent classes of freight given above, but the terri¬ 
torial divisions (except Canada) are also given. 
The following table gives the average weekly 
loadings for 1920, 1921, 1922 and the first nine 
months of 1923. 


CAR LOADINGS 
(Average Weekly) 


Merchandise 
L. C. L. 
and Mis- 


Grain and 

Grain Live 


Forest 


Products Stock Coal Products Ore cellaneous Total* 


1920 
May 
June 
July 
August 
September 
October 
November 
December 

1921 
January 
February 
March 
April 
May 
June 



404 


BUSINESS BAROMETERS 


CAR LOADINGS — Continued. 



Grain and 


Grain 

Products 

1920 


July 

56,585 

August 

59,973 

September 

55,272 

October 

50,478 

November 

37,998 

December 

42,032 

1922 


January 

50,460 

February 

51,199 

March 

41,184 

April 

32,874 

May 

42,186 

June 

39,614 

July 

50,229 

August 

56,111 

September 

51,670 

October 

52,160 

November 

53,602 

December 

50,537 


Live 

Stock 

23,979 

27,643 

29,907 

36,834 

31,524 

29,100 

32,568 

29.113 
18,092 

27.114 
29,550 
29,201 
26,656 
29,633 
34,603 
40,404 
39,671 
33,764 


Merchandise 
L. C. L. 

Forest and Mis- 

Coal Products Ore cellaneous Total* 


145,420 

155,376 

162,882 

196,206 

154,434 

130,297 


41,558 

45,010 

46,443 

52,392 

48,846 

44,752 


30,389 

31,769 

28,554 

21,490 

7,830 

5,470 


448,886 

487,854 

512,322 

559,386 

469,524 

424,479 


750,717 

812,265 

840,318 

929,022 

756,624 

682,869 


168,720 48,960 
190,126 50,124 
131,116 52,734 
72,528 56,052 
82,494 60,714 
93,736 62,621 
74,691 54,892 
101,256 58,563 
167,709 57,116 
195,234 59,525 
197,361 61,964 
187,975 57,383 


4,410 421,722 
4,151 486,143 
5,250 495,258 
9,654 521,106 
18,384 540,546 
54,054 563,043 
63,364 545,585 
66,002 '557,241 
53,769 560,896 
46,819 587,702 
33,565 569,774 
9,659 487,525 


734,442 

768,741 

827,400 

727,488 

782,670 

851,700 

825,018 

876,517 

934,387 

992,470 

968,331 

839,784 


1923 

January 47,908 34,603 193,499 66,460 10,867 477,952 845,074 

February 41,480 32,172 185,020 65,850 10,396 492,697 841,741 

March 41,402 31,311 186,228 75,068 13,057 554,111 916,632 

April 38,432 31,556 176,584 77,166 19,429 581,867 940,991 

May 33,856 31,562 181,179 75,893 58,685 588,955 985,347 

June 34,344 30,103 183,503 77,078 78,322 577,274 995,411 

July 42,730 30,538 184,846 69,888 82,709 561,025 986,097 

August 51,623 32,963 189,985 76,197 81,003 582,848 1,027,991 

September 51,949 38,234 177,145 72,765 75,516 597,986 1,027,335 

* Total includes coke loadings in addition to the groups listed. 


Note: — The American Railway Association 
divides its report into eight districts with a mini¬ 
mum of 139 roads as follows: 


New England: 

Group A. 7 

“ B. 13 

“ C. 21 

Allegheny. 11 

Pocahontas . 3 

Southern: 

Group A. 7 

“ b .; 19 









IDLE CAR FIGURES 


405 


Northwestern. 16 

Centralwest. 22 

Southwestern. 17 

Canadian Roads . 3 

Total.139 


In interpreting idle car figures, therefore, an 
increase in the number of idle cars naturally indi¬ 
cates a slackening in business, while a decrease in 
the number of cars available signifies improvement 
in business. Likewise when there is a shortage of 
cars, a further increase in the shortage indicates 
greater demand for transportation; a decrease in 
shortage indicates a lessening in demands of busi¬ 
ness and better transportation service. In inter¬ 
preting the figures two factors must always be kept 
in mind: first, the seasonal tendency. The 
heaviest demand usually comes during the fall 
months, while the lightest demand is found during 
the spring. Second, the additions to railroad 
equipment which, of course, make a difference in 
the relation of car supplies to the demands of 
business. 

Now that car loading figures are available, these 
give a more direct indication of the amount of 
freight carried than is given by the idle car figures. 
Car loadings often continue heavy after new orders 
for goods have begun to fall off and vice versa. In 
other words, car loading figures represent the 
movement of goods which have been manufactured 
during the three or four months preceding. 







406 


BUSINESS BAROMETERS 


POLITICAL FACTORS 

Some of the most successful merchants of the old 
school maintained that the three greatest factors 
which influence business conditions are crops, 
money and politics, and that of these the most 
important is the last named, politics. Certainly 
this statement appears reasonable to some, but it 
is probable that political as well as social changes 
are largely governed and influenced by other funda¬ 
mental business conditions. For instance, at a 
time of great expansion of business when commod¬ 
ity prices are rising, the common people gradually 
get disgruntled and wish a change in administration. 
On the other hand, at a time of depression the 
political party in power is likely to suffer from the 
liquidation in wages and customary hard times. 
In fact, once in every little while the populace 
assumes control, institutes a few improvements, but 
soon becomes divided by contentions, and again 
capital and the conservatives are given the reins. 
Nevertheless a study of politics as reflecting the 
underlying conditions of the country is quite neces¬ 
sary. That portion of American history with which 
these pages are most concerned, from 1860 up to the 
present time, is most admirably described by Alex. 
Dana Noyes in his “ Forty Years of American 
Finance.” 

There has always been a most delicate relation 
between politics and the state of trade. Almost 
every period of depression and period of prosperity, 
although not wholly due to political conditions, 
has been greatly augmented by them. Among 


POLITICAL FACTORS 


407 


those various political factors may be mentioned 
the following: — 

The “ Embargo Act ” in the early part of the 
century and the war of 1812. 

The establishment of the United States Bank. 

The discontinuance of the United States Bank. 

The beginning of “ state rights ” discussions. 

The slavery discussion and the Civil War. 

The “ Reconstruction Acts.” 

The inflation of the currency. 

The “ Resumption Act.” 

The silver coinage law. 

The resumption of specie payments. 

The circulation of silver certificates. 

The radical measures under President Arthur, 
followed by the panic of 1884. 

The campaign and the election of the Repub¬ 
lican Party in 1888, coincident with the period of 
prosperity. 

The silver purchase act and the great gold ex¬ 
portations followed by the panic of 1893. 

The tariff legislation of the ’90’s followed by the 
prosperous conditions of 1900. 

The various Bryan scares. 

President Roosevelt’s campaigns against trusts. 

Continuation of campaigns against trusts under 
President Taft’s administration. 

The organization of a national Progressive Party, 
and the victory of the Democratic Party in 1912. 

Anti-trust legislation and the tariff, income tax 
and currency laws of 1913. 

Federal Reserve system inaugurated in 1914. 


408 


BUSINESS BAROMETERS 


Stock Dividend Decision. 

Fordney McCumber tariff. 

Cancellation of War Debts. 

Soldier Bonus. 

Agricultural Credit Act. 

Of all these various acts, by far the most influ¬ 
ential were those affecting the currency and the 
tariff. Both of these are extremely sensitive 
questions. 

Any change in the money standard or banking 
system, especially if it disturbs either foreign or 
domestic confidence, is very destructive to the com¬ 
mercial prosperity of the country. Even when 
banking questions or the money standard are dis¬ 
cussed in Congress, there seems to be an immediate 
division of interests between the producer or the 
manufacturer and the banker or the investor. The 
legislation desired by the producer seems to be op¬ 
posed by the investor and vice versa. The reason 
for this is very evident, for anything which tends 
to make money easier to the producer, depreciates 
the value of money in the hands of the bankers 
and investors who possess it. On the other hand, 
legislation which strengthens the importance of 
the banker and investor, tends to handicap the 
producer and manufacturer. 

Any legislation designed to reorganize the bank¬ 
ing system of the United States on anything but a 
gold basis, like that upon which the banking sys¬ 
tems of England and other countries were founded, 
always retards trade. Any legislation which gives 
any additional importance to gold is always greeted 


POLITICAL FACTORS 


409 


with approval by all classes of manufacturers, 
merchants and investors. All other legislation, 
especially that recognizing as a standard, silver or 
anything other than gold, is always a dangerous 
sign, often causing bankers and investors to call 
loans and raise rates. Such conditions usually 
precede a general crisis. 

As to the propriety of high or low duties on 
foreign goods, this is an open question. Although 
nearly all bankers are in favor of protection, yet 
most economists (on whose advice the bankers de¬ 
pend regarding many matters) are almost without 
exception against heavy protection; but whether 
high tariff for protection or low tariff for revenue 
only is best for the country, the fact remains that 
whenever the subject is discussed and whenever 
there is to be a change in classifications or duties, 
this discussion and legislation have always affected 
business conditions. Moreover, although the adop¬ 
tion of certain tariff legislation may give a great 
impetus to prosperity, yet the previous discussion 
of the subject has always tended to disturb confi¬ 
dence, promote a feeling of uncertainty and seri¬ 
ously check business. 

This was very well described by Henry Hall as 
follows: — 

“ In the United States the business world has 
become accustomed to the protective principle 
and even the prospect of reduced duties has always 
chilled the spirit of enterprise, while the reality 
has always given a setback to business, sooner or 
later. On the other hand, enactment of protective 


410 


BUSINESS BAROMETERS 


tariff, in lieu of one for revenue only, has always 
proved exciting and has quickened into intense 
activity the looms, forges and machinery of the 
entire country. 

“ The backward state of American industry 
prior to the Civil War is held to have been'due in 
large measure to the relaxation of protection under 
the tariff laws of 1842 and 1857. There can be no 
question that the twenty or more tariff enact¬ 
ments from 1861, when the Morrill protective tariff 
went into operation, to 1872 when the ^system had 
been fairly adjusted to the requirements of home 
industry, aided materially in developing the mines, 
sustaining the factories against foreign competi¬ 
tion, supplying the railroads with an immense and 
profitable traffic, and promoting the farming inter¬ 
est of every section of the States.” 

The lower duties of 1883 on many manufactures, 
added to the force of other evil influences, ended 
in the crisis of 1884. The crisis of 1893 rose 
in a distinct, measure from the agitation in the 
then Democratic Congress for a tariff for reve¬ 
nue only, which eventuated in the Wilson bill. 
The prosperity which the States subsequently 
enjoyed must be attributed in a marked degree 
to the protective tariff enacted under President 
McKinley. 

All writers on crises agree in giving great weight 
to tariff changes. An investor should therefore at 
all times be fully informed with regard to such 
actual or possible revolutions in political control at 
Washington as are likely to have a bearing on the 


POLITICAL FACTORS 


411 


tariff laws. As a further illustration of this subject 
the setback given business during the tariff dis¬ 
cussion of May to July, 1909, and the renewed 
business energy which followed upon the passing 
of the bill is of suggestive interest. 

Therefore successful hankers, merchants and in¬ 
vestors always carefully watch 'political conditions and 
if possible reduce them to a decimal or barometer 
index number. 

The following conclusions are suggested relative 
to “ Political Uncertainties 

1. During a Period of Business Depression. 

(a) An. increase in political agitation usually 
signifies no improvement. 

(b) A decrease usually signifies an improve¬ 
ment. 

(c) No change is unfavorable or favorable 
according to whether or not any important meas¬ 
ure is under consideration. 

2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase in political agitation usually 
signifies no improvement. 

(b) A decrease usually signifies ah improve¬ 
ment. 

(c) No change is unfavorable or favorable 
according to whether or not any important meas¬ 
ure is under consideration. 

* This assumes all political factors to be unfavorable and the best con¬ 
ditions to be when only routine business is being considered. However, 
there are times when certain political acts are distinctly favorable, and 
then the reverse of these conclusions should apply. 


412 


BUSINESS BAROMETERS 


3. During a Period of Over-expansion. 

(a) An increase in political agitation fore¬ 
casts a decline. 

(b) A decrease often signifies continued im¬ 
provement. 

(c) No change is unfavorable or favorable 
according to whether or not any important measure 
is under consideration. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) Same as above. 

(b) Same as above. 

(c) Same as above. 

Of course, if some legislation is under discussion 
the enactment of which would greatly relieve the 
situation, then an “ increase ” would be distinctly 
favorable, and a decrease distinctly unfavorable. 

SOCIAL CONDITIONS AND MISCELLANEOUS 
STATISTICS 

The condition of public opinion in the country 
as a whole, and the stand taken by any large num¬ 
ber of people, or a representative body of people, 
with regard to social or religious questions, exerts 
a constant influence upon business conditions. 
Not only in politics and the larger field of govern¬ 
ment as shown in election or municipal reforms, but 
in all religious or social movements, the feeling of 
the people should be watched closely. Most in¬ 
vestors and merchants look upon crops, money and 
politics as the three most important topics to study 
in order to form a clear idea of the present state of 


SOCIAL CONDITIONS 


413 


business and a sound judgment of what is to be ex¬ 
pected. They would also do well to look into the 
field of social and religious tendencies, because they 
will find there material of great use in determining 
the trend of business. 

From time immemorial, periods of prosperity 
have been accompanied by a decline in religious 
interests and by a laxness in moral and social cus¬ 
toms. Conversely, a period of hard times and 
business depression always brings men back to reli¬ 
gious thoughts and worship. A striking illustra¬ 
tion of this is found in the panic of 1857. “ It was 

in October of this year (1857) that Mr. Lamphier, 
a missionary of the Dutch Reformed Church, 
thought in his own heart that an hour of daily 
prayer would bring consolation to afflicted business 
men! ”* In a few weeks those holding meetings 
were astonished to find crowds growing too large 
for the buildings. The Methodist Church on John 
Street and the Dutch Reformed Church on Fulton 
Street were opened daily. Next Burton’s Theatre 
was hired, and throughout the winter, noonday 
prayer meetings were held at numerous places in the 
city. “ Even the firemen and policemen held 
their prayer meetings, so that we may feel perfectly 
assured of the truth of what the writer says when 
he adds, 1 It is doubtful whether under heaven was 
seen such a sight as went on in the city of New York 
in the winter and spring of the year 1857-1858.’ 
From New York as a centre, the mysterious influ¬ 
ence spread abroad till it penetrated all New Eng- 

* Ross’ " Social Psychology,” page 78. 


414 


BUSINESS BAROMETERS 


land in the East, southward as far as Virginia and 
even beyond, westward to Buffalo, Cincinnati, 
Chicago, St. Louis.” The American Civil War 
was followed by great financial and social corrup¬ 
tion, and even General Grant, although himself 
incorruptible, could not save his country from the 
effect of greed and wrongdoing. 

The famous election which followed was noted 
for the frauds which characterized both parties, and 
these frauds were so gigantic that to this day it is 
uncertain whether Tilden or Hayes was actually 
elected President of the United States. As is the 
case during all such periods of personal, commercial 
and civic corruption, this period was followed by the 
great business depression beginning about 1873. 

Immediately following this depression a period 
of religious and civic revivals swept over the nation. 
The additions to churches, the great temperance 
movement, and other similar movements for right¬ 
eousness received an unprecedented impetus during 
these years following the panic of 1873. This re¬ 
turn to righteousness was again followed by a 
return to over-expansion in the early ’80’s. 

The nation, however, soon forgot whence these 
blessings came and religious interest again declined. 
This lack of interest in religious matters culminated 
in the panic of 1884. Once more the reign of un¬ 
godliness was checked and the country recuperated 
from the depression of 1884, and again enjoyed 
several years of wonderful prosperity. It, however, 
took the nation only a few years to forget again, and 
once more civic corruption, social immorality and 


SOCIAL CONDITIONS 


415 


intemperance began to increase. From 1890 to 1893 
religious and similar organizations showed very little 
growth. Consequently the era of prosperity began 
to wane, and culminated in the panic of 1893. 

The panic of 1893 again brought people to think 
upon serious matters, and during the following few 
years there was a great revival of righteousness 
throughout America. In fact, the additions to 
churches and the growth of other religious move¬ 
ments even exceeded that during the period follow¬ 
ing the panic of 1873. The people again cast aside 
luxuries, municipal and state governments were 
purified, evil doers were replaced by men of high in¬ 
tegrity, and great interest in all religious and moral 
undertakings developed in all parts of the country. 

People again lived in a decent and God-fearing 
manner in accordance with what their station per¬ 
mitted. Commercial houses forsook the careless 
and questionable methods used during former 
times and the old-fashioned “ drummer ” was re¬ 
placed by the modern high grade salesman. It was 
on this foundation that the new period of improve¬ 
ment started and it was due to this revival of right¬ 
eousness, that the country was able to enjoy many 
years of great prosperity which began simultane¬ 
ously with the close of the Spanish War in 1898 
and 1899. 

Unfortunately, however, the nation again forgot 
and was still unable to stand the temptations of a 
period of prosperity. Therefore again religious 
interest declined, political corruption re-opened 
and social immorality increased. Referring to 


416 


BUSINESS BAROMETERS 


these conditions Dr. Lyman Abbott once stated 
as follows: 

“ Popular rumor attributed to Mr. McKinley’s 
managers, although not to him, wholesale cor¬ 
ruption in securing his first nomination and his 
first election. This corruption has not been con¬ 
fined to any one locality or to any one party. It 
has been equally appalling in its dimensions in New 
York, Boston, Philadelphia, Cincinnati, Chicago, 
St. Louis, Minneapolis, Denver and San Francisco. 
It has included not only Boards of Aldermen but 
Legislatures, and it has crept into both the admin¬ 
istrative and legislative departments of the Federal 
Government. Two United States Senators and 
three United States Representatives have subjected 
themselves to criminal prosecution for participa¬ 
tion in frauds. Nor has this corruption been con¬ 
fined to political circles. Insurance companies, 
banks, trust companies, manufacturers and trade 
unions have all been implicated. More than one 
financial magnate is now serving a sentence for 
fraud. Others are under sentence and are awaiting 
the decision on appeal. Even judges have not been 
wholly free from suspicion of obligation for their 
election to the plutocracy.” 

This is a description of the conditions from 1902 
to 1906, when the exposures commenced. Like all 
preceding periods of unrighteousness, this was 
followed by the panic of 1907, and the succeeding 
years of depression. 

Of course some writers, although admitting that 
a business depression revives interest in religious 


SOCIAL CONDITIONS 


417 


matters and that, during the boom times, men do 
not have the time or inclination to give religious 
matters any thought, claim that the religious state 
of the nation does not affect the business condi¬ 
tions as here represented. Whether or not this is 
true, is debatable; but certainly a study of the his¬ 
tory of the United States and every other nation, 
seems to point to a definite relation between the 
two interests. Moreover, all economists agree that 
the religious condition of the country is distinctly 
worthy of study,—although they may disagree as to 
its relative importance compared with other subjects. 

Thus Ex-President Taft said: “ The hum of pros¬ 
perity and the ecstasy of great profits are likely to 
dull our interest in these reforms and to lead us 
back again to the old abuses, unless we insist upon 
legislation which shall clinch and enforce those 
standards by positive law.” 

And again: “The difficulty is that whenever 
everybody is prosperous, when everybody is com¬ 
fortable, then is the time when our old friend Satan 
steps in and helps along the evil cause; then is the 
time when we are apt to be inert and enjoy the 
things we have, without looking forward in the fu¬ 
ture and seeing that evils will grow and ultimately 
swamp us.” 

Or to quote another authority: 

“ Beware lest . . . thou say in thine heart, ‘ My 
power and the might of mine hand hath gotten me 
this wealth/ But thou shalt remember the Lord 
thy God, for it is He that giveth thee power to get 
wealth.” Deut. 8 :11, 17, 18. 


418 


BUSINESS BAROMETERS 


STATISTICS SHOWING INCREASE IN THE MEM¬ 
BERSHIP OF CONGREGATIONAL CHURCHES 
IN THE UNITED STATES BY PROFESSION 

(This denomination is chosen as an illustration owing to 
its complete reports; but it is believed that the same changes 
from one year to another would be true of an average of the 
figures of all denominations.) 

Year No. of Add. Total Business Additions by 

to Churches Mem- New Conditions Profession per 

July bers by Members 100,000 Population 

Profession 


1860 

2,585 

7,468 

14,821 

1861 

2,555 

5,522 

12,151 

1862 

2,580 

6,196 

12,629 

1863 

2,652 

7,765 

14,378 

1864 

2,667 

9,032 

15,809 

1865 

2,723 

11,030 

18,442 

1866 

2,780 

11,249 

19,994 

1867 

2,810 

19,127 

30,210 

1868 

2,951 

16,432 

28,246 

1869 

3,043 

15,167 

27,373 

1870 

3,121 

13,501 

25,137 

1871 

3,202 

13,271 

23,343 

1872 

3,263 

13,945 

25,394 

1873 

3,325 

13,216 

24,620 

1874 

3,403 

15,279 

27,300 

1875 

3,437 

17,306 

29,645 

1876 

3,509 

20,844 

33,294 

1877 

3,564 

24,138 

35,111 

1878 

3,620 

20,498 

31,735 

1879 

3,674 

16,689 

27,506 

1880 

3,745 

12,230 

22,749 

1881 

3,855 

11,311 

22,646 

1882 

3,936 

13,539 

25,895 

1883 

4,010 

14,800 

28,377 

1884 

4,092 

17,923 

32,055 

1885 

4,170 

21,729 

37,135 

1886 

4,477 

27,166 

43,185 

1887 

4,404 

41,156 

67,530 

1888 

4,569 

25,994 

45,036 

1889 

4,689 

29,286 

49,859 

1890 

4,817 

27,592 

47,782 

1891 

4,985 

30,614 

52,086 

1892 

5,140 

31,582 

54,576 

1893 

5,236 

34,444 

57,561 

1894 

5,346 

38,853 

62,946 

1895 

5,486 

35,327 

57,932 


Decline. 

. 24 Persons 

Depression. 

. 17 

ii 

ii 

. 19 

ii 

Over-expansion.. 

. 23 

a 

Decline.'!. 

. 27 

a 

Depression. 

. 32 

a 

Improvement. . . 

. 32 

a 

ii 

. 53 

ii 

Over-expansion.. 

. 45 

ii 

ii 

. 40 

ii 

Decline. 

. 35 

a 

ii 

. 34 

a 

a 

. 34 

a 

a 

. 32 

a 

Depression. 

. 36 

a 

ii 

. 39 

a 

a 

. 46 

a 

a 

. 52 

a 

Improvement. . . 

. 43 

a 

ii 

. 34 

a 

Over-expansion.. 

. 24 

a 

ii 

. 22 

a 

Decline. 

. 26 

a 

Depression. 

. 28 

a 

ii 

. 33 

a 

ii 

. 39 

a 

Improvement. . . 

. 47 

a 

ii 

. 70 

a 

Over-expansion.. 

. 43 

a 

ii 

48 

a 

ii 

44 

a 

Decline. 

. 48 

a 

ii 

. 49 

a 

Depression. 

. 52 

a 

ii 

. 58 

a 

ii 

. 51 

a 
























SOCIAL CONDITIONS 


419 


Year 

No. of 

Add. 

Total 

Business 

Additions by 

to 

Churches Mem- 

New 

Conditions 

Profession per 

July 


bers by 
Profession 

Members 

100,000 Population 

1896 

5,546 

32,147 

54,640 

Improvement. . 

. . 46 Persons 

1897 

5,614 

31,090 

52,211 

u 

. . 44 

U 

1898 

5,620 

25,189 

44,492 

Over-expansion. 

. . 35 

U 

1899 

5,604 

24,514 

44,185 

<< 

. . 33 

u 

1900 

5,650 

27,101 

48,602 

a 

. . 36 

u 

1901 

5,753 

28,398 

49,879 

u 

. . 37 

a 

1902 

5,821 

29,195 

51,627 

Decline. 

. . 38 

“ 

1903 

5,900 

29,403 

51,521 

Depression. . . . 

. . 36 

u 

1904 

5,919 

30,193 

58,198 

Improvement. . 

. . 37 

u 

1905 

5,931 

34,881 

57,722 

Over-expansion. 

U 

. . 42 

u 

1906 

5,923 

32,890 

56,543 

. . 38 

u 

1907 

5,989 

34,642 

59,346 

Decline. . 

. . 40 

u 

1908 

6,006 

35,100 

59,792 

Depression. . . 

. . 40 

u 

1909 

5,991 

34,245 

62,461 

U 

. . 38 

u 

1910 

6,033 

30,582 

57,689 

O ver-expansio n. 

. . 33 

ti 

1911 

6,048 

30,319 

57,667 

Depression. . 

. . 32 

u 

1912 

6,064 

30,776 

57,662 

Transition... . 

. . 32 

(( 

1913 

6,096 

34,294 

61,430 

Decline. 

. . 36 

u 

1914 

6,093 

40,787 

68,467 

Depression. . . . 

. . 42 

u 

1915 

6,103 

43,172 

70,026 

Improvement. . 

43 

a 

1916 

6,089 

42,081 

68,259 

Over-expansion. 

. . 42 

(( 

1917 

6,050 

39,624 

65,734 

51,372 

<< 

. . 38 

k 

1918 

6,019 

29,467 

u 

. . 28 

u 

1919 

5,959 

33,852 

59,922 

u 

. . 32 

u 

1920 

5,924 

39,922 

71,857 

Decline. 

. . 37 

(( 

1921 

5,873 

45,875 

78,365 

Depression. . . . 

. . 42 

u 

1922 

5,826 

44,175 

73,030 

Improvement. . 

. . 40 

“ 


The following conclusions are suggested relative 
to “ Social Conditions 

1. During a Period of Business Depression. 

(a) An increase in social righteousness sig¬ 
nifies an improvement. 

(b) A decrease in social righteousness signi¬ 
fies no improvement and that conditions may 
become worse. 

(c) No change signifies uncertainty. 










420 


BUSINESS BAROMETERS 


2. During a Period of Improvement Following a 

Period of Depression. 

(a) An increase in social righteousness signi¬ 
fies continued improvement. 

(b) A decrease signifies no improvement or 
that the improvement may temporarily be checked. 

. (c) No change signifies that caution should be 
used. 

3. During a Period of Over-expansion. 

(a) An increase in social righteousness signi¬ 
fies continued improvement. 

(b) A decrease signifies no further improve¬ 
ment, but that a change for the worse may be ex¬ 
pected. 

(c) No change calls for caution. 

4. During a Period of Decline Following a Period 

of Over-expansion. 

(a) An increase tends to shorten the period of 
decline and signifies an improvement. 

(b) A decrease signifies no improvement and 
tends to make the coming period of depression all 
the more severe. 

(c) No change signifies the same. 


MISCELLANEOUS STATISTICS 


421 


MISCELLANEOUS STATISTICS 

Among those miscellaneous statistics which are 
tabulated by some bankers and merchants may be 
mentioned the following: 

Statistics on Losses and Wastes. 

Statistics on Changed Conditions. 

Absorption of Capital. 

Results of Invention. 

Economies due to Improved Methods. 

Statistics on Frauds and Lack of Credit. 

The Abuse of Credit. 

The Contraction of Circulating Mediums. 

Overproduction. 

Psychological Tendencies. 

Military Armament. 

Income Taxes.. 

Excise and Internal Revenues. 

Associated Charity Reports. 

All of the above have some distant bearing either 
for diagnosing present conditions or for forecasting 
future conditions; but none are sufficient in them¬ 
selves, and when studying any one, due weight must 
be given to all of the others. The figures on any 
one of these subjects are of value only in their re¬ 
lation to the other figures which we have previously 
considered. As, however , none of these miscellaneous 
subjects are of sufficient importance to the merchant 
or investor for him to collect and tabulate figures , no 
immediate thought need be given to them. 


CHAPTER IX 

A TALK ON COPPERS 


S seen in preceding chapters, the laws of 



trade and finance necessitate a fluctuation 


in the price of all staple commodities. The 
tendency of the price of many commodities is up¬ 
ward. This is owing to several causes, among 
which may be mentioned the increase in the cir¬ 
culating medium and the increased consuming 
power of a rapidly growing population. There is 
a constant increase in demand which the increase in 
supply does not fully equal. When, however, this 
course of prices is represented graphically, it will 
be found that the lines are not straight, but “ zig¬ 
zag.” Although each low point may not be as 
low as the preceding low points and the general 
tendency may be upward, yet there is a continual 
fluctuation. A careful study will further show 
that these abrupt changes occur at intervals of 
every few years and are certain to come, although 
with no set regularity. 

Many reasons to prove this latter statement 
may be offered, but we will confine ourselves to one. 
If any one commodity continued always to increase 
in price, without the fluctuation above mentioned, 
the tendency would be for every one to enter the 
business of manufacturing, selling or investing in 
that one commodity. 


A TALK ON COPPERS 


423 


Of course there is a great difference in the fluc¬ 
tuations of different commodities as some com¬ 
modities fluctuate in price much more than others; 
and it is more difficult to understand the laws 
affecting the fluctuation in the prices of some com¬ 
modities than of others. It is possible, however, to 
see the general trend of all prices taken as a group. 
As the country passes from periods of over-expan¬ 
sion to periods of depression and vice versa, the 
general average price of commodities fluctuates as 
well as the average price of stocks. 

Therefore it is very important to the investor to 
anticipate changes in business conditions by ob¬ 
taining and studying the necessary statistics. 
Like the farmer, the investor must be first willing 
to purchase and plant the seed before expecting to 
reap a harvest. The majority of investors have 
not enough patience to spend money in obtaining 
data and wait for results which are not immediate. 
There are also a great many people who, although 
believing that prices must be lower in a year or so, 
have not sufficient self-control to wait a year be¬ 
fore investing a given amount of money. Money 
“ burns in their pockets,” and, as soon as they ac¬ 
cumulate a certain amount, they seem determined 
to invest it, even though they know that by de¬ 
positing it in a bank and waiting they can pur¬ 
chase the same stocks for one-third of the price 
later on. The same class of people are also the 
ones who have not sufficient self-control and energy 
necessary to sell their securities in times of great 
over-expansion. 


424 


BUSINESS BAROMETERS 


To those, however, who are willing to spend 
money in accumulating the necessary data and 
who have the self-control to act in accordance with 
their better judgment, the opportunities to make 
money are unlimited. Such persons can, more¬ 
over, confine themselves to absolute and outright 
cash purchases and invest in only the most con¬ 
servative stocks, based on standard commodities. 
We cannot here study the application of the above 
theory to all classes of commodities and all classes 
of stocks. Therefore, as an illustration, only one 
application will here be considered: namely, that of 
purchasing and selling high grade standard divi¬ 
dend-paying copper stocks in accordance with the 
market price of copper. 

Instead of endeavoring to explain the details of 
the system as used in purchasing steel stocks, 
cotton mill stocks, and other securities, the point 
of this chapter is to show how it works with one 
single commodity such as copper. There are two 
main requirements:— first, that one must keep in 
constant touch with business conditions; and 
second, that one must always keep informed of the 
best mines, realizing that the relative conditions of 
mines change from one year to another. 

It is impossible for a broker to give a rule such 
as that copper stocks should be sold when the price 
of metal is above 24 cents and bought when the 
price of metals is below 14 cents; for one year 24 
cents may be high and another year it may not be 
high. Moreover, the safest stocks today may not 
be those in which it was best to invest a few years 


A TALK ON COPPERS 


425 


ago. It therefore is necessary to obtain data on 
these points from some reliable agency operated for 
the purpose. The press cannot be relied upon 
for this information, for reasons that can be readily 
understood. It is impossible for the press always 
to state the facts, especially when the outlook is un¬ 
favorable. 

One can best obtain an idea as to whether the 
present price of copper is low or high from a study 
of fundamental statistics. Tables showing the 
high and low prices of the metal, over a long period 
of years, should of course, also be studied; but 
these figures are not nearly so-important as figures 
on “ Check Transactions,” “ Failures/’ “ Foreign 
Trade,” etc., by which the movement in the price 
of metal may be forecast The price of the metal 
bears the same relation to the price of copper, stocks as 
railroad earnings bear to the price of railroad stocks. 
After the price of the metal publicly changes, it is too 
late to trade in the stock. In order to successfully 
trade in the stock, one must, therefore, forecast changes 
in the price of the metal. This can be done only by 
a study of fundamental statistics relating to general 
. business conditions. 

The rules given below should be followed for 
practical investing: 

1. Make a list of the standard dividend paying 
stocks of companies which issue complete reports. 

2. Star on this list the names of such companies 
as are doing a sufficient amount of development 
work, and which have ore blocked out for a long 
period of years. 


426 


BUSINESS BAROMETERS 


3. Select the stock from among those which are 
starred which, with copper at a low price, will show 
the greatest percent earned on the selling price of 
the stock. 

The result of such analysis clearly shows which 
is the best single stock to purchase. If there are 
four or five which figure approximately the same, 
it is best for an investor to divide his money among 
them all. 

It should be remembered that when ascertaining 
the cost of production, three factors must be con¬ 
sidered : — 

1. The pounds of copper per ton of rock crushed. 

2. The cost of supplies, labor, etc., including 
taxes and all fixed charges. 

3. The money spent on development, machin¬ 
ery, etc. 

The first factor is the most important for com¬ 
parison purposes, and varies not only as between 
different mines, but also in the same mine as be¬ 
tween different levels and deposits of ore. Latest 
figures can be obtained from any broker. 

The second factor is more or less constant with 
each mine; but the third factor is very different 
with different mines. This third factor is im¬ 
portant, but it is difficult to obtain satisfactory 
information excepting for the more conservative 
properties. 

After obtaining this data, the secret of successful 
investing depends simply upon purchasing these 
stocks when fundamental statistics show general 
business to be in a period of depression and keeping 


A TALK ON COPPERS 


427 


these stocks for a few years, until such time as 
such statistics show the country to be in a period of 
over-expansion when the stocks should be sold, 
although at this time probably the majority of in¬ 
vestors are just beginning to purchase stocks. 
When the stocks have been sold, the money should 
be deposited in some safe bank or invested in high 
grade short term bonds, until the price of the 
metal falls and the country experiences another 
period of depression. These same or other standard 
stocks are then again purchased, and in a few years 
the investor again sells at a huge profit. There is 
little risk in such a method if only the most conser¬ 
vative stocks are bought, and there is no reason 
why any man cannot turn an original investment 
of about $5,000 into $100,000 within about twenty 
years, provided he is willing to spend a reasonable 
amount of time or money each year on collecting 
and tabulating fundamental statistics. 

The theory advanced in this chapter is based on the 
two assumptions that the mines will not become ex¬ 
hausted, and that no unforeseen event will make the 
working of these mines unprofitable. We refer to 
the physical arrangement of the mines, to the dis¬ 
covery of much richer and greater mines in other 
countries, and to the development of some other 
substance which will supersede copper in the in¬ 
dustrial world. 

Neither of these assumptions need be considered 
when investing in conservative railroad or industrial 
stocks, as railroads will always be of value both 
for their tangible assets and for their earning 


428 


BUSINESS BAROMETERS 


capacity. Therefore, for an investment this author 
personally believes that “ railroads ” and indus¬ 
trials are much preferable to “ coppers.” Still the 
latter are often very profitable for speculative 
purposes; and many, unlike the author, prefer 
such copper stocks to railroad stocks, owing to 
their freedom from the effects of undesirable legis¬ 
lation and certain other unfavorable factors. 

The author wishes to emphasize, however, the 
importance of purchasing a large number of stocks 
rather than to invest in stocks of one or two com¬ 
panies, and his especially applies to mines for the 
reasons above stated. It is best not to try to com¬ 
pare any one copper stock with another except in a 
broad way. The man who takes the position that 
he knows nothing definitely about any of them, and 
purchases a sufficient number of stocks to be inter¬ 
ested in the industry as a whole is the one who is 
in the strongest position. If one 'purchases enough 
different copper stocks so as to have an interest in the 
companies which control about two-thirds of the output, 
and buys these stocks when the average copper stock 
market is at a low level, he should receive a handsome 
profit on the investment when the industry revives. 
Whatever may happen to one individual stock, the 
average profit should be very substantial. One, 
however, should not buy “ prospects ” which are 
little known, but should select a group of coppers 
which are paying dividends, or about to pay divi¬ 
dends. 

In this connection it is argued by many that the 
uncertainty in regard to ore reserves does not apply 


A TALK ON COPPERS 


429 


to the “ porphyries.” The ore in these mines 
being regularly distributed through the soil, it is 
possible to block out a very large known tonnage in 
advance of extraction. For many years it has been 
known that land in certain parts of this country 
contained a small percentage of copper, but not 
until a few years ago have chemists perfected a 
process by which the copper could be extracted. 
These companies now have large known supplies 
blocked out, and because of this they are considered 
especially attractive by many investors. 


430 


BUSINESS BAROMETERS 


STATISTICS ON 
NOTE: All earnings and dividends are figured on the 



Par 

Stock 

Funded 

Earnings Per Share 

Name of Stock 

Value 

Outstanding 

Debt 

1921 

1920 

1919 

1918 

American Smelting Com.. 

$1 0 

i$60,998,000 

$52,447,700 

Nil 

$4.81 

$2.95 

$7.29 

Anaconda. 

50 

150,000,000 

174,669,000 

Nil 

22.01 

22.65 

28.26 

Calumet & Arizona. 

10 

6,425,240 

None 

Nil 

2.88 

0.81 

6.36 

Calumet & Hecla. 

25 

20,000,000 

None 

v Nil 

Nil 

Nil 

51.36 

Chile. 

25 

108,500,000 

35,000,000 

Nil 

0.07 

Nil 

0.91 

Chino. 

5 

4,500,000 

None 

Nil 

1.52 

1.27 

4.66 

Copper Range. 

25 

9,859,750 

. None 

0.60 

Nil 

2.46 

7.34 

Greene Cananea. 

100 

50,000,000 

None 

Nil 

1.12 

2.21 

6.87 

Inspiration. 

20 

23,639,340 

None 

Nil 

1.94 

3.54 

6.96 

Kennecott. 

No par 

2,812,558 shs. 

15,000,000 

Nil 

0.53 

0.16 

2.56 

Miami. 

5 

$3,735,570 

None 

Nil 

1.89 

Nil 

4.00 

Mohawk. 

25 

2,500,000 

None 

Nil 

1.89 

5.15 

6.96 

Nevada Consolidated. . . . 

5 

9,997,285 

None 

Nil 

0.12 

0.55 

1.70 

Ray Consolidated. 

10 

15,771,790 

None 

Nil 

0.58 

1.06 

3.05 

U. S. Smelting Com. 

50 

817,555,888 

12,289,500 

Nil 

3.44 

14.06 

8.75 

United Verde Extension.. 

0.50 525,000 

None 

Nil 

Nil 

Nil 

3.17 

Utah Copper. 

10 

16,244,900 

None 

Nil 

3.03 

5.08 

11.35 


(1) Also $50,000,000 7% Preferred Stock outstanding. 

(2) Figured on combined earnings of Anaconda and American Brass Co. 

(3) Irregular. Copper Range paid $1.00 April 10, 1923; Mohawk $1.00 May, $1.00 

June, 1923; Cal. & Hecla $10.00 April 14, 1923. 

(4) Six months only. 

(5) Includes capital distributions of $1.00 per share in 1920, $1.00 in 1919, $2.00 in 1918, 

and $0.50 in 1917. 
















A TALK ON COPPERS 


431 



COPPER STOCKS 


basis of the number of shares outstanding in 1921 


1923 

Earnings Per Share Div. 


1917 

1916 

1915 

1914 

Rate 

$25.20 

$28.43: 

$13.77 

$5.34 

$5.00 

213.81 

220.60 

27.60 

23.41 

3.00 

10.32 

17.36 

8.48 

4.82 

4.00 

113.66 

(Not 

reported) 

310.00 

0.95 

0.50 



.50 

11.27 

14.40 

7.67 

3.44 


12.60 

15.42 

9.05 

1.25 

31.00 

4.99 

6.87 

1.01 

1.92 


9.38 

17.45 

<0.51 


2.00 

4.14 

9.92 

2.36 


3.00 

4.29 

7.27 

4.56 

1.65 

2.00 

16.81 

22.30 

15.11 

4.55 

32.00 

4.83 

7.51 

2.78 

0.74 


6.60 

7.65 

2.91 

1.52 


5.18 

20.49 

13.92 

1.61 

3.50 

7.86 

>6.60 



4.00 

17.06 

24.09 

10.69 

5.02 

4.00 


Dividends Paid 


1921 

1920 

1919 

1918 

1917 

1916 

1915 

1914 

$1.00 

$4.00 

$4.00 

$5.50 

$7.00 

$5.15 

$3.28 

$3.28 


2.33 

3.10 

5.82 

6.60 

5.82 

3.10 

3.02 

2.00 

4.00 

3.00 

.800 

11.00 

9.00 

3.12 

2.88 


5.00 

10.00 

55.00 

85.00 

75.00 

50.00 

10.00 


1.13 

3.00 

4.50 

9.90 

8.25 

3.00 

2.50 


1.50 

2.50 

6.00 

10.00 

9.95 

2.99 

— 


1.00 

1.50 

8.00 

7.90 

6.84 

0.98 

1.94 


3.50 

a nn 

e nn 

q op; 

7 9** 




O.UU 

o.uu 






52.00 

so ah 

54 nn 

5A on 

p; p;n 





u< ±.uu 





2.00 

2.00 

2.50 

4.50 

8.75 

5.75 

2.25 

1.50 


5.50 

5.00 

10.00 

20.50 

17.00 

6.00 

1.00 


0.75 

1.50 

6 3.25 

«4.15 

3.75 

1.50 

1.13 


1.00 

22.00 

3.25 

14.20 

2.75 

1.19 

0.69 


5.00 

5.50 

5.00 

5.00 

4.25 

0.75 

1.50 

1.00 

2.00 

2.25 

94.50 

2.85 

1.00 



2.50 

i°6.00 

106.001010.001014.50 

12.00 

4.25 

3.00 


(6) Includes capital distributions of $2.65 per share in 1918, and $0.50 in 1917. 

(7) Includes capital distributions of $2.00 per share in 1919, and $0.50 in 1917. 

(8) Also $24,317,775 7% Preferred Stock outstanding. 

(9) Includes special distribution of $1.50 per share from Reserve for Depletion. 

(10) Includes capital distributions of $4.56 per share in 1920, $4.80 in 1919, $2.25 in 1918 
and $1.75 in 1917. 


































STATISTICS ON PRODUCTION 


432 


BUSINESS BAROMETERS 


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A TALK ON COPPERS 


433 


TABLE SHOWING RANGE IN PRICE OF LAKE 
COPPER SINCE 1860 

Highest Lowest 


Year 

Av. 

Price 

Month 


Price 

Month 

1860 

22 

24.0 

(Jan.) 

to 

19.7 

(Dec.) 

1861 

22 

27.0 

(Dec.) 

to 

17.5 

(July) 

1862 

21 

32.8 

(Nov.) 

to 

20.7 

(May) 

1863 

33 

38.7 

(Dec.) 

to 

29.0 

(July) 

1864 

47 

55.0 

(July) 

to 

39.0 

(Jan.) 

1865 

39 

50.5 

(Jan.) 

to 

28.0 

(July) 

1866 

34 

42.0 

(Jan.) 

to 

26.5 

(Nov.) 

1867 

25 

29.2 

(Jan.) 

to 

21.5 

(Dec.) 

1868 

23 

24.5 

(Dec.) 

to 

21.5 

(Jan.) 

1869 

24 

27.0 

(Feb.) 

to 

21.5 

(Dec.) 

1870 

21 

23.3 

(Nov.) 

to 

19.0 

(Mar.) 

1871 

24 

27.0 

(Dec.) 

to 

21.2 

(Apr.) 

1872 

35 

44.0 

(Apr.) 

to 

27.1 

(Jan.) 

1873 

28 

35.0 

(Jan.) 

to 

21.0 

(Nov.) 

1874 

22 

25.0 

(Jan.) 

to 

19.0 

(Aug.) 

1875 

22 

23.8 

(Sept.) 

to 

21.5 

(Jan.) 

1876 

21 

23.2 

(Jan.) 

to 

18.7 

(Aug.) 

1877 

19 

20.5 

(Feb.) 

to 

17.5 

(Dec.) 

1878 

16 

17.6 

(Jan.) 

to 

15.5 

(Oct.) 

1879 

18 

21.7 

(Nov.) 

to 

15.5 

(Jan.) 

1880 

21 

25.0 

(Jan.) 

to 

17.8 

(June) 

1881 

18 

20.3 

(Dec.) 

to 

16.0 

(July) 

1882 

19 

20.3 

(Jan.) 

to 

17.8 

(Apr.) 

1883 

16 

18.1 

(Jan.) 

to 

14.8 

(Nov.) 

1884 

13 

15.0 

(Dec.) 

to 

11.0 

(Dec.) 

1885 

10 

11.8 

(Feb.) 

to 

9.8 

(May) 

1886 

11 

12.1 

(Dec.) 

to 

10.0 

(May) 

1887 

13 

17.7 

(Dec.) 

to 

9.9 

(May) 

1888 

16 

17.6 

(Nov.) 

to 

15.8 

(Jan.) 

1889 

13 

17.5 

(Jan.) 

to 

11.0 

(Sept.) 

1890 

15 

17.2 

(July) 

to 

14.0 

(Mar.) 

1891 

12 

15.0 

(Jan.) 

to 

10.2 

(Dec.) 

1892 

11 

12.3 

(Dec.) 

to 

10.5 

(Feb.) 

1893 

10 

12.5 

(Jan.) 

to 

9.6 

(Aug.) 

1894 

9 

10.2 

(Jan.) 

to 

9.0 

(June) 

1895 

10 

12.2 

(Aug.) 

to 

9.3 

(Apr.) 

1896 

10 

12.0 

(June) 

to 

9.7 

(Jan.) 

1897 

11 

12.0 

(Jan.) 

to 

10.7 

(Nov.) 

1898 

12 

13.2 

(Dec.) 

to 

11.0 

(Jan.) 

1899 

17 

19.3 

(Apr.) 

to 

13.2 

(Jan.) 

1900 

16 

17.2 

(Apr.) 

to 

16.0 

(Feb.) 

1901 

16 

• 17.0 

(Jan.) 

to 

13.0 

(Dec.) 

1902 

12 

13.5 

(Feb.) 

to 

11.0 

(Jan.) 



434 BUSINESS BAROMETERS 


Year 

Av. 

Highest 

Price 

Month 


Lowest 

Price 

Month 

1903 

13 

15.3 

(Mar.) 

to 

12.0 

(Dec.) 

1904 

13 

15.3 

(Nov.) 

to 

12.2 

(Feb.) 

1905 

15 

18.8 

(Dec.) 

to 

15.0 

(May) 

1906 

22 

25.0 

(Dec.) 

to 

17.8 

(Sept.) 

1907 

20 

26.2 

(Mar.) 

to 

12.5 

(Oct.) 

1908 

13 

14.4 

(Dec.) 

to 

12.7 

(May) 

1909 

13 

14.3 

(Jan.) 

to 

12.8 

(Mar.) 

1910 

13 

13.8 

(Jan.) 

to 

12.5 

(July) 

1911 

12 

14.3 

(Dec.) 

to 

12.2 

(May) 

1912 

16 

17.8 

(Sept.) 

to 

14.2 

(Jan.) 

1913 

16 

17.8 

(Jan.) 

to 

14.5 

(Dec.) 

1914 

14 

15.5 

(Feb.) 

to 

11.3 

(Oct.) 

1915 

18 

23.0 

(Dec.) 

to 

13.0 

(Jan.) 

1916 

28 

35.0 

(Dec.) 

to 

23.0 

(Jan.) 

1917 

29 

35.3 

(Mar.) 

to 

23.5 

(*) 

1918 

25 

26.0 

(*) 

to 

23.5 

(•) 

1919 

19 

23.5 

(July) 

to 

14.8 

(Mar.) 

1920 

18 

19.5 

(Jan.). 

to 

12.8 

(Dec.) 

1921 

13 

14.0 

(Dec.) 

to 

12.0 

(Aug.) 

1922 

14 

15.1 

(Dec.) 

to 

12.7 

(Apr.) 


TABLE SHOWING RANGE IN PRICES OF LEADING 
COPPER STOCKS SINCE 1889 

The prices of the leading copper stocks since 
1889 have ranged as follows: 

1890 AVERAGE 56-87 

Osceola ranged from 45 (Sept.) to 32 (Dec.); 
Quincy 130 (Sept.) to 80 (Nov.). 

1891 AVERAGE 55-76 

Osceola ranged from 40 (June) to 26 (Nov.); 
Quincy 85 (Feb.) to 112 (Aug.). 

1892 AVERAGE 82-91 

Osceola ranged from 24 (Jan.) to 38 (Nov.); 
Quincy 140 (Dec.) to 145 (Dec.). 

* Price fixed by Gov’t. 


A TALK ON COPPERS 


435 


1893 AVERAGE 65-89 

Osceola ranged from 36 (Jan.) to 25 (Aug.); 
Quincy 143 (Jan.) to 105 (Aug.). 

1894 AVERAGE 59-76 

Osceola ranged from 28 (Apr.) to 19 (July); 
Quincy 125 (Jan.) to 81 (July). 

1895 AVERAGE 41-74 

Osceola ranged from 42 (July) to 20 (Dec.); 
Quincy 102 (Mch.) to 170 (July); Wolverine 10 
(July) to 3 (Dec.). 

1896 AVERAGE 43-58 

Osceola ranged from 21 (July) to 32 (Nov.); 
Quincy 134 (Feb.) to 104 (Aug.); Wolverine 9 
(Jan.) to 10 (Nov.). 

1897 AVERAGE 47-63 

Osceola ranged from 28 (Apr.) to 42 (Sept.); 
Quincy 129 (Jan.) to 104 (Mch.); Wolverine 9 
(Apr.) to 19 (Sept.). 

1898 AVERAGE 53-91 

Osceola ranged from 38 (Mch.) to 87 (Dec.); 
Quincy 105 (Mch.) to 150 (Dec.); Wolverine 18 
(Mch.) to 38 (Dec.). 

1899 AVERAGE 51-87 

Mohawk ranged from 38 (Apr.) to 14 (Dec.); 
Osceola 105 (Feb.) to 61 (Dec.); Quincy 190 (Jan.) 
to 125 (Dec.); Utah Cons. 53 (Apr.) to 21 (Dec.); 
Wolverine 50 (Jan.) to 35 (Dec.). 








436 


BUSINESS BAROMETERS 


1900 AVERAGE 57-78 

Amalgamated ranged from 83 (Jan.) to 100 
(Nov.); Mohawk 12 (June) to 28 (Dec.); Osceola 
58 (June) to 80 (Nov.); Quincy 132 (July) to 178 
(Sept.); Utah Cons. 38 (Apr.) to 22 (June); Wol¬ 
verine 36 (June) to 49 (Dec.). 

1901 AVERAGE 57-99 

Amalgamated ranged from 130 (June) to 61 
(Dec.); Mohawk 22 (Jan.) to 56 (Sept.); Osceola 
120 (Sept.) to 72 (Dec.); Quincy 180 (Apr.) to 125 
(Dec.); Utah Cons. 38 (Nov.) to 19 (Dec.); Wol¬ 
verine 74 (Sept.) to 44 (Dec.). 

1902 AVERAGE 47-74 

Amalgamated ranged from 79 (Feb.) to 53 
(Nov.); Copper Range 44 (Mch.) to 65 (Oct.); 
Mohawk 27 (Jan.) to 49 (Sept.); Osceola 90 (Feb.) 
to 48 (Nov.); Quincy 147 (Feb.) to 100 (Nov.); 
Utah Cons. 27 (Feb.) to 19 (July); Wolverine 42 
(Jan.) to 65 (Dec.). 

1903 AVERAGE 42-71 

Amalgamated ranged from 76 (Mch.) to 34 
(Oct.); Copper Range 75 (Feb.) to 37 (July); 
Granby 53 (Apr.) to 36 (July); Mohawk 58 (Feb.) 
to 31 (July); Osceola 79 (Feb.) to 44 (July); 
Quincy 127 (Feb.) to 80 (Oct.); Utah Cons. 22 
(Jan.) to 34 (May); Wolverine 75 (Mch.) to 54 
(July). 

1904 AVERAGE 46-81 

Amalgamated ranged from 43 (Feb.) to 83 
(Dec.); Copper Range 38 (Feb.) to 75 (Nov.); 


A TALK ON COPPERS 437 

Granby 25 (Mch.) to 58 (Nov.); Mohawk 34 
(Feb.) to 58 (Nov.); Osceola 53 (Feb.) to 98 

i (Nov.); Quincy 80 (Feb.) to 125 (Nov.); Utah 
Cons. 30 (Jan.) to 47 (Nov.); Wolverine 68 (Jan.) 
to 110 (Nov.). 

1905 AVERAGE 64-98 

Amalgamated ranged from 70 (Jan.) to 112 
(Dec.); Copper Range 64 (Jan.) to 85 (Dec.); 
Granby 50 (Jan.) to 105 (Dec.); North Butte 
34 (Aug.) to 93 (Dec.); Mohawk 48 (May) to 65 
(Dec.); Osceola 88 (Feb.) to 115 (Oct.); Quincy 
95 (May) to 118 (Jan.); Utah Cons. 39 (Mch.) 
to 59 (Nov.); Wolverine 105 (Jan.) to 135 (Dec.). 

1906 AVERAGE 73-127 
Amalgamated ranged from 118 (Feb.) to 92 
(July); Copper Range 87 (Jan.) to 67 (July); 
Granby 80 (July) to 152 (Oct.); North Butte 75 
(Mch.) to 118 (Oct.); Calumet & Arizona 107 
(July) to 185 (Dec.); Mohawk 55 (Mch.) to 85 
(Dec.); Osceola 93 (Mch.) to 151 (Dec.); Quincy 
114 (Jan.) to 80 (July); Utah Cons. 70 (Jan.) to 
52 (June); Wolverine 131 (Jan.) to 190 (Dee.). 

1907 AVERAGE 56-140 
Amalgamated ranged from 122 (Jan.) to 42 
(Oct.); Copper Range 105 (Jan.) to 44 (Oct.); 
Granby 152 (Feb.), to 60 (Oct.); North Butte 
120 (Jan.) to 30 (Oct.); Calumet & Arizona 198 
(Feb.) to 89 (Oct.); Mohawk 96 (Jan.) to 37 (Oct.); 
Osceola 181 (Feb.) to 71 (Oct.); Quincy 148 (Feb.) 
to 70 (Oct.); Utah Cons. 79 (Jan.) to 25 (Oct.); 
Wolverine 198 (Jan.) to 93 (Oct.). 








438 


BUSINESS BAROMETERS 


1908 AVERAGE 66-100 
Amalgamated ranged from 45 (Feb.) to 88 

(Nov.); Copper Range 55 (Feb.) to 84 (Nov.); 
Granby 80 (Jan.) to 110 (July); North Butte 41 
(Feb.) to 90 (Nov.); Calumet & Arizona 93 (Feb.) 
to 103 (Aug.); Mohawk 45 (Feb.) to 73 (Nov.); 
Osceola 77 (Feb.) to 135 (Dec.); Quincy 77 (Feb.) 
to 100 (Aug.); Utah Cons. 29 (Jan.) to 50 (Aug.); 
Wolverine 115 (Jan.) to 155 (Nov.). 

1909 AVERAGE 80-105 
Amalgamated ranged from 65 (Feb.) to 96 

(Nov.); Copper Range 68 (Feb.) to 87 (Nov.); 
Granby 110 (Jan.) to 90 (Feb.); North Butte 85 
(Jan.) to 47 (Dec.); Calumet & Arizona 119 (Jan.) 
to 96 (May); Mohawk 70 (Jan.) to 57 (July); 
Osceola 122 (Feb.) to 170 (Dec.); Quincy 99 (Jan.) 
to 83 (Dec.); Utah Cons. 37 (Feb.) to 50 (Nov.); 
Wolverine 139 (Mch.) to 158 (Aug.). 

1910 AVERAGE 53-97 

Amalgamated ranged from 90 (Jan.) to 55 (July); 
Copper Range 85 (Jan.) to 58 (Feb.); Granby 111 
(Jan.) to 20 (July); North Butte 50 (Jan.) to 18 
(June); Calumet & Arizona 103 (Jan.) to 45 (July); 
Mohawk 75 (Jan.) to 43 (July); Osceola 166 (Jan.) 
to 114 (July); Quincy 92 (Mch.) to 66 (July); 
Utah Cons. 46 (Jan.) to 12 (Dec.); Wolverine 150 
(Jan.) to 102 (July). 

1911 AVERAGE 44-69 

Amalgamated ranged from 72 (June) to 45 
(Sept.); Copper Range 70 (Feb.) to 47 (Sept.); 


A TALK ON COPPERS 


439 


Granby 44 (June) to 26 (Aug.); North Butte 36 
(June) to 20 (Sept.); Calumet & Arizona 45 (Sept.) 
to 64 (Dec.); Mohawk 36 (Apr.) to 57 (Dec.); 
Osceola 124 (Jan.) to 81 (Sept.); Quincy 55 (Sept.) 
to 76 (Dec.); Utah Cons. 10 (Jan.) to 20 (June); 
Wolverine 122 (Feb.) to 74 (Nov.). 

1912 AVERAGE 52-79 

Amalgamated ranged from 60 (Feb.) to 92 (Oct.); 
Copper Range 66 (Apr.) to 48 (Dec.); Granby 33 
(Feb.) to 77 (Nov.); North Butte 22 (Feb.) to 39 
(Oct.); Calumet & Arizona 57 (Feb.) to 83 (Aug.); 
Mohawk 50 (Jan.) to 73 (June); Osceola 130 (June) 
to 100 (Dec.); Quincy 95 (June) to 72 (Dec.); Utah 
Cons. 20 (Apr.) to 9 (July); Wolverine 117 (Apr.) 
to 65 (Dec.). 


1913 AVERAGE 43-66 

Amalgamated ranged from 81 (Jan.) to 62 (June); 
Copper Range 53 (Jan.) to 32 (Dec.); Granby 51 
(June) to 78 (Sept.); North Butte 35 (Jan.) to 22 
(June); Calumet & Arizona 73 (Jan.) to 57 (June); 
Mohawk 65 (Jan.) to 38 (Nov.); Osceola 107 
(Jan.) to 67 (Dec.); Quincy 80 (Jan.) to 52 (Dec.); 
Utah Cons. 11 (Jan.) to 7 (May); Wolverine 76 
(Jan.) to 39 (Nov.). 

1914 AVERAGE 42-56 

Amalgamated ranged from 78 (Feb.) to 49 (Dec.); 
Copper Range 41 (Feb.) to 29 (Dec.); Granby 91 
(Feb.) to 60 (Dec.); No. Butte 31 (Feb.) to 20 
(Dec.); Calumet & Arizona 70 (March) to 53 


440 


BUSINESS BAROMETERS 


(Dec.); Mohawk 39 (Apr.) to 50 (Dec.); Osceola 
84 (Feb.) to 64 (Dec.); Quincy 68 (Feb.) to 52 
(Dec.); Utah Cons. 9 (Jan.) to 14 (Feb.); Wol¬ 
verine 48 (Feb.) to 30 (Dec.). 

1915 AVERAGE 39-74 

Anaconda ranged from 25 (Feb.) to 92* (Nov.); 
Copper Range 30 (Jan.) to 65 (Dec.); Granby 58 
(Jan.) to 94 (Apr.); No. Butte 22 (Jan.) to 38 
(Apr.); Calumet & Arizona 51 (Feb.) to 79 (Apr.); 
Mohawk 46 (Jan.) to 98 (Dec.); Osceola 64 (Jan. 
& Feb.) to 93 (Apr.); Quincy 50 (Jan.) to 95 (Apr.); 
Utah Cons. 9 (Feb. & Mch.) to 16 (June); Wol¬ 
verine 32 (Jan.) to 70 (Apr.). 

1916 AVERAGE 59-86 

Anaconda ranged from 77 (July) to 101 (Sept.); 
Copper Range 55 (July) to 87 (Nov.); Granby 79 
(July) to 120 (Nov.); No. Butte 20 (July) to 32 
(Nov.); Calumet & Arizona 66 (July) to 101 
(Nov.); Mohawk 77 (July) to 108 (Nov.); Osceola 
79 (Aug.) to 105 (Nov.); Quincy 81 (July) to 109 
(Nov.); Utah Cons. 12 (July) to 30 (Nov.); Wol¬ 
verine 67 (Feb.) to 45 (Oct.). 

1917 AVERAGE 35-72 

Anaconda ranged from 51% (Nov.) to 87 (May); 
Copper Range 39% (Dec.) to 68 (Jan.); Granby 65 
(Nov.) to 92% (Jan.); No. Butte 11% (Oct.) to 
24% (Mar.); Calumet & Arizona 55% (Dec.) to 
84% (May); Mohawk 56% (Nov.) to 98 (Jan.); 

* Par value of Anaconda increased from $25 to $50 May 19. 


A TALK ON COPPERS 


441 


Osceola 53J^ (Dec.) to 95 (Mar.); Quincy 60 
(Nov.) to 95 (Feb.); Utah Cons. 9)^ (Dec.) to 
21^2 (Feb.); Wolverine 31 (Dec.) to 53^ (Mar.). 

1918 AVERAGE 49-64 

Anaconda ranged from 59 (Dec.) to 74 (Oct.); 
Copper Range 40 (Dec.) to 51(Nov.); Granby 
74 (Jan.) to 86 (Oct.); No. Butte 10(Dec.) to 
17^ (May); Calumet & Arizona 61 (Dec.) to 73% 
(May); Mohawk 50% (Dec.) to 00% (May); 
Osceola 4:0% (June) to 65 (Jan.); Quincy 59 (Dec.) 
to 78 (May); Utah Cons. 7 (Dec.) to 12 (Jan.); 
Wolverine 18 (Dec.) to 36 (Jan.). 

1919 AVERAGE 38-61 

Anaconda ranged from 55 (Nov.) to 78 (July); 
Copper Range 39 (Mar.) to 62 (July); Granby 
48 (Dec.) to 80 (Jan.); No. Butte 9 (Feb.) to 20 
(July); Calumet and Arizona 57 (Mar.) to 86 
(July); Mohawk 50 (Feb.) to 83 (July); Osceola 
45 (Mar.) to 73 (July); Quincy 52 (Mar.) to 83 
(July); Utah Cons. 7 (Dec.) to 13 (July); Wolver¬ 
ine 15 (Mar.) to 31 (July). 

1920 AVERAGE 23^9 

Anaconda ranged from 30 (Dec.) to 67 (Apr.); 
Copper Range 25 (Dec.) to 49 (Jan.); Granby 
15 (Dec.) to 56 (Jan.); No. Butte 8 (Dec.) to 22 
(Apr.); Calumet and Arizona 40 (Dec.) to 69 
(Mar.); Mohawk 41 (Dec.) to 72 (Mar.); Osceola 
21 (Dec.) to 58 (Jan.); Quincy 35 (Dec.) to 65 
(Jan.); Utah Cons. 3 (Dec.) to 10 (Feb.); Wolver¬ 
ine 8 (Dec.) to 23 (Jan.). 


442 


BUSINESS BAROMETERS 


1921 AVERAGE 23-36 

Anaconda ranged from 32 (Aug.) to 51 (Dec.); 
Copper Range 27 (Jan.) to 41 (Dec.); Granby 15 
(Aug.) to 35 (Nov.); No. Butte 8 (Mar.) to 14 
(Dec.); Calumet and Arizona 41 (Jan.) to 60 
(Dec.); Mohawk 44 (Jan.) to 59 (Dec.); Osceola 

21 (Aug.) to 36 (Dec.); Quincy 34 (Aug.) to 46 
(Dec.); Utah Cons. 2 (Nov.) to 5 (Jan.); Wolver¬ 
ine 9 (July) to 14 (Feb.). 

1922 AVERAGE 28-40 % 

Anaconda ranged from 45 (Nov.) to 57 (May); 

Copper Range 35 (Dec.) to 47 (May); Granby 

22 (Nov.) to 35 (May); No. Butte 9 (Oct.) to 15 
(May); Calumet and Arizona 51 (Nov.) to 67 
(June); Mohawk 52 (Nov.) to 68 (June); Osceola 
25 (Nov.) to 38 (Aug.) Quincy 30 (Nov.) to 50 
(May); Utah Cons. 1 (Feb.) to 4 (June); Wolver¬ 
ine 7 (Nov.) to 16 (May). 


FINAL WORD TO READERS 


It occurs to the author that this book may 
possibly be the means of causing some persons who 
will not give the proper study to statistics and 
general conditions, to invest in stocks. I therefore 
advise every reader that, if he is unwilling to invest 
about one hundred dollars a year in collecting and 
tabulating the necessary statistical data, it is better 
to buy no stocks whatsoever, but to confine all 
investments strictly to high grade bonds such as 
are recommended by conservative bond dealers. 

One other thing,— whether buying stocks or 
bonds, the investor should not be in a hurry to make 
money too fast. The principal invested should 
grow slowly and naturally. One should be willing 
to creep before walking and be willing to walk 
before running, remembering that there are many 
years in which to accomplish the desired object 
and that success depends very largely upon pro¬ 
gressing slowly and carefully, especially during the 
first few years. 

, Success comes not by forecasting , but rather by 
doing the right thing at the right time and always 
being willing to .change one’s course. For this 
reason much more money is made by directing 
one’s business and investments with a purpose of 
preventing panics than by trying to forecast panics 
and then pursuing a policy based upon the belief 
that said forecast must prove true. With this 
object in view, I offer the services of my large 
organization that merchants, bankers and investors 
may always be best prepared for whatever the 
future is most likely to bring forth. 

Roger W. Babson. 


APPENDIX 


THE EFFECT OF WAR ON BUSINESS 

The first effect of the outbreak of war is to set up 
a violent disturbance. This affects the securities 
markets in two ways. First the rupture of com¬ 
mercial relations between the belligerent powers 
causes those individuals who hold obligations of 
enemy nation or nations, or citizens thereof to try 
to market those securities in a hurry, thus depress¬ 
ing their prices. Loans involved in international 
transactions are hastily called and money tightens. 
Neutral holders of securities of belligerents join in 
the effort to sell them, and a general decline is 
precipitated. 

Such action on the part of securities markets is 
usually the forerunner of a period of business 
depression. Trade routes are disorganized; the 
demand is cut off for certain lines of goods that 
formerly were exported to enemy countries, or 
countries cut off by blockades. 

But the recovery from this war depression is usu¬ 
ally rapid. It is most rapid in the case of neutrals 
who are in a position to sell to the belligerents with¬ 
out. themselves suffering the expense, taxes, and 
labor disturbances incident to war. A new and 
vigorous demand springs up for war materials of 
all kinds, thus supplying the impetus which starts 
industry in motion. 


Business in the Napoleonic Wars 

The Napoleonic Wars are the only ones which in magnitude 
and economic effect can truly be compared with the recent 
world struggle. It is the only previous period in which the 
whole of Europe and the United States have been involved. 

In drawing a parallel between present conditions and those 


Commodity prices have always been one of the best in¬ 
dexes of general business conditions. Rising prices indicate 
(and are a powerful stimulant to) business activity. Sus¬ 
tained high prices likewise mean good business. Declining 
prices indicate and cause business reverses; low prices indi- 


which existed a hundred years ago, there are many changes 
\\ hich we must allow for. One is that because of rapid means 
of communication and transportation, events occur much 
more rapidly today. The Twenty Tears’ War could now be 
fought in ten. Another difference is that agriculture, and 
not manufacturing, was the most important industry in 
England in those days. In spite of changed circumstances, 
however, the chart below gives a clear picture of the condi¬ 
tions that we may reasonably expect. 


cate depression. As an index of business conditions, prices 
quoted in terms of the popular currency are more truly repre¬ 
sentative than those quoted in terms of specie (specie in the 
case of England was gold). The dash line on the chart below 
is given to show what commodities would have cost if one 
could have paid gold for them. The difference between the 
dash line and the solid line from 1800 to 1820 shows the de¬ 
preciation of the value of paper currency. 

It will be seen from the chart that the period of highest 
prices and greatest business activity was reached shortly 


before the close of the war. The overthrow of Napoleon at 
Waterloo definitely decided the struggle. Prices of com¬ 
modities and securities, however, discounted the coming of 
peace by several months, dropping precipitately from their 
war basis. After a brief period of readjustment there 
followed what we might call a “ peace boom ” in 1817 
and 1818. This was caused by the restoration of trade 
channels which had been closed by the war, together 
with other reconstruction. There was a sharp advance 
in peace stocks and more active business in all lines. 
This boom was short-lived. It soon exhausted itself 
and the inevitable operation of the law of equal reac¬ 
tion was seen in a long and severe depression that began 
in 1818 and lasted until 1825. This depression was not 
local, but general over all Europe and America. 













































































































































































































APPENDIX 


This revival of demand and speeding up of busi¬ 
ness is accompanied by a monetary inflation which 
serves to finance the new buying, and in turn acts 
as a stimulating cause, acting to extend the rise in 
the price of war materials to all other lines. 

This inflation will come in the case of a belligerent 
country through emissions of paper money, exten¬ 
sions of bank credit and the flotation of government 
bonds, which serve as collateral for further expan¬ 
sion of credit. In the case of neutrals the inflation 
will be less marked and will come about through 
the inflow of specie in payment for purchases. 

The next stage in the case of belligerents is a 
period of readjustment. Producing power — labor 
and capital — is diverted from old channels to the 
production of war material on a large scale. Labor 
supply becomes the limiting factor in industry. 
The cost of living rises and government interven¬ 
tion has in every belligerent country stopped the 
free play of purely economic forces. 

The success of price fixing, priority rules, regula¬ 
tions regarding distribution and consumption, 
depend partly on the extent to which the ultimate 
demand can be controlled, but by far the most im¬ 
portant factor in control of these economic condi¬ 
tions is the extent to which the public responds to 
the patriotic appeal, and supports the government's 
regulations. Non-economic values, such as public 
opinion, fear of losing good will and public esteem, 
must be brought into play to give effect to the 
government’s rules regarding prices and the con¬ 
sumption of foods, etc. 


APPENDIX 


The net result is that the whole economic life 
becomes readjusted to a war basis. Generally 
speaking, this readjustment is unfavorable to the 
business enterpriser who finds his profits limited 
and taxed to a point where his ardor is greatly 
cooled. Expected large profits are not realized, 
the peak of the boom is passed and the country is 
entering on a period of depression. 

While the war lasts this period will develop 
rather slowly, since the demand and employment 
will be certain in those lines in which the readjust¬ 
ment has left it. 

With the end of the war a pronounced disturb¬ 
ance is inevitable. The established demand for 
war goods suddenly collapses. On the other hand, 
new lines of trade open up and a supply of labor is 
released. Monetary conditions ease and there is 
likely to be a brief reconstruction boom. This will 
be followed by a period of reaction in which the de¬ 
struction of men and property will show its full 
effect. The financial and social difficulties which a 
great bonded debt creates, together with falling 
prices and labor troubles, all combine to produce on 
a nation much the same effect as that of the days 
following a debauch on the part of the individual. 

Thus war does not act to defeat in any way the 
application of the law of equal reaction to business 
conditions, but rather speeds up the process and 
intensifies both the action and reaction. 


“No sir, ye can bet it ain’t th’ people that have no money 
that causes panics. Panics are th’ result iv too manny people 
havin’ money. Th’ top iv good times is hard times an’ tti 
bottom iv hard times is good times. Whin I see wan man with 
a shovel on his shouldher dodgin’ eight thousand autymobills I 
begin to think ’tis time to put me money in me boot. 

“Don’t git excited about it, Hinnessy, me boy. Cher up. 
’Twill be all right tomorrow, or th’ next day, or sometime. ’Tis 
wan good thing about this here wurruld, that nawthan lasts 
long enough to hurt. I have been through manny a panic. I 
cud handle wan as well as Morgan. Panics cause thimsilves 
an’ take care of thimsilves.” 


— Dooley 




















GENERAL INDEX 


Action equals reaction, 104. 


Annual events, 

of 1860, 

144; 

of 1861, 

145; 

of 1862, 

146; 

of 1863, 

146; 

of 1864, 

147; 

of 1865, 

148; 

of 1866, 

149; 

of 1867, 

150; 

of 1868, 

151; 

of 1869, 

152; 

of 1870, 

153; 

of 1871, 

154; 

of 1872, 

155; 

of 1873, 

156; 

of 1874, 

158; 

of 1875, 

159; 

of 1876, 

160; 

of 1877, 

161; 

of 1878, 

162; 

of 1879, 

163; 

of 1880, 

164; 

of 1881, 

166; 

of 1882, 

167; 

of 1883, 

169; 

of 1884, 

170; 

of 1885, 

171: 

of 1886, 

172: 

of 1887, 

173; 

of 1888, 

174; 

of 1889, 

175; 

of 1890, 

176: 

of 1891, 

177; 

of 1892, 

178; 

of 1893, 

179; 

of 1894, 

180; 

of 1895, 

182; 

of 1896, 

183; 

of 1897, 

185; 

of 1898, 

185; 

of 1899, 

187; 

; of 1900, 

188; 

of 1901, 

189: 

; of 1902, 

190; 

of 1903. 

192: 

; of 1904, 

193; 

of 1905, 

194: 

; of 1906, 

195; 

of 1907, 

196: 

; of 1908, 

198; 

of 1909, 

199 

; of 1910, 

201; 

of 1911, 

202 

; of 1912, 

204; 

of 1913, 

205 

; of 1914, 

207; 

of 1915, 

209 

; of 1916, 

212; 

.of 1917, 

214 

; of 1918, 

216; 

of 1919, 

217 

; of 1920, 

219; 

of 1921, 

, 221 

; of 1922', 

, 222; 

Babsonchart, 

U. S., 

107; 

method 

of 

plotting, 

132; 

subiects 

5 involved in, 

131; 

X-Y Line, 

discussion of, 


132. 

Balance of trade, 328; general 
rules concerning, 330. 

Banks: Comptroller’s Re¬ 

ports, 277; deposits of, 299; 
economic laws concerning, 
280-281, 287; functions of, 
101; investments of, 279, 


280; loans of, 278; notes of, 
279; resources of, 280; table 
of reserves and deposits, 
295, 296, 297; table of loans 
and resources, opp. 280; 
Statement of Federal Re¬ 
serve Members, 302, 303, 
304. 

Bank clearings, 240; as a 
barometer, 20, 128, 240; of 
New York, 244; general 
rules concerning, 249. 

Baring failure, 177. 

“ Black Friday ” panic, 152. 

Bonds: Range of movement 
in, 61; tables of panic prices 
in 1884, 62; in 1893, 63; in 
1903, 64, 65; in 1907, 66, 
67; tables showing effect of 
reorganizations on prices, 
70-72; of 1st class, 72; of 
2nd class, 73; of 3rd class, 
73; of 4th class, 74; of mis¬ 
cellaneous, 75. 

Building statistics, as a ba¬ 
rometer, 233, 236; general 
rules concerning, 239-240. 

Business movements: con¬ 
trolling law of, 112; fore¬ 
told by fundamental sta¬ 
tistics, 18; rules concern¬ 
ing, 125, 229; length of, 
121; periods of, 16, 27, 121, 
122, 123. 

Capital, 231. 

Car loadings, 403. 

Cash in banks, ratio to de¬ 
posits, 296; table of, 296. 

Certificates of Clearing; 
Houses, 314; table of, 316. 

Check transactions, 240. 




INDEX 


Clearing Houses, functions of, 
240; certificates of, 314; 
table of certificates issued, 
316. 

Commodity prices, 359; as a 
barometer, 24, 130; in 

crises, 359; chart of since 
1860, opp. 82; affected by 
gold production, 351; in¬ 
dexes of, 365; interest of to 
bankers, 99; example in, 
84; rules concerning, 368; 
tables of since 1859, 86; 
tendencies affecting, 363. 

Comparative statistics, value 
of, 13. 

Comptroller’s reports, 277. 

Copper, 422^ table of produc¬ 
tion of leading companies, 
432; table of profits per 
share of leading stocks, 
430; range in price of Lake 
Copper since 1860, 433; 
range in price of leading 
stocks since 1889, 434, 

Crops, 379; as a barometer, 
25; government board on, 
389; government reports 
on, 380; nature of monthly 
reports on, 384; general 
rules concerning, 394. 

Deposits of banks, 295, 299. 

Exports of merchandise, 325; 
benefit from increase in 
exports of manufactured 
goods, 326; general rules 
concerning, 327. 

Failures, 250; as a barometer 
of business conditions, 19, 
129, 251, 254; tables of, 
251, 252, 253, 255, 256, 
257, 258; general rules 
concerning, 260. 


Federal Reserve System, 306; 
purpose of, 307; 12 Federal 
Reserve Banks, 308; Fed¬ 
eral Reserve Notes, 309; 
Chart of, 308. 

Fire losses, as a barometer, 
334. 

Foreign exchange, 343. 

Foreign money rates, 343; 
general rules concerning, 
350. 

Foreign trade, 316; as a 
barometer, 23, 129; bal¬ 
ance of, 328; exports, 325; 
imports, 316; table of, 318; 
volume of, 328,. 

Fundamental statistics, 15, 
18; Babsonchart of, 108; 
list of twenty-five subjects 
under, 19, 128; mechanical 
work of collecting, 128; 
methods of handling, 132; 
(also see foot note, 136); 
need of studying many sub¬ 
jects in connection with, 
124; theory of, 27; value to 
merchants, 82. 

General heads under funda¬ 
mental statistics, twelve, 
19, 128. 

Gold, movements of, 331; as 
a barometer, 23, 127; pro¬ 
duction of, 351; relation of 
production to prices, 351; 
general rules concerning, 
358. 

Idle car figures, 402. 

Immigration, 266; as a ba¬ 
rometer of labor conditions, 
21, 129; general rules con¬ 
cerning, 267. 




INDEX 


Imports of merchandise, 316; 
dangers accompanying in¬ 
crease in, 320; general rules 
concerning, 324; table of, 
318. 

Industrial movements, fore¬ 
told by fundamental sta¬ 
tistics, 18; the law main¬ 
taining in the past, 17; 
controlling law of, 112; 
length of, 121; periods in, 
15, 27, 123; rules of periods 
in, 126. 

Investment conditions, sub¬ 
jects related to, 370; crops, 
379; foreign money rates, 
343; idle car figures, 402; 
new securities, 376; politi¬ 
cal factors, 406; railroad 
earnings, 395; social condi¬ 
tions, 412; stock exchange 
transactions, 373. 

Investments of the banks, 
279, 304. 

Labor conditions, 261; immi¬ 
gration figures as a barome¬ 
ter, 21, 129; lack of satis¬ 
factory figures on, 262. 

Loans of banks, 277, 302; 
historic survey of, 283; 
general rules concerning, 
287; tables of, opp. 280. 

Mercantile conditions, sub¬ 
jects related to, 229; bank 
clearings, 240; business fail¬ 
ures, 250; labor conditions, 
261; new building, 231. 

Miscellaneous statistics, list 
of headings for, 421. 

Monetary conditions, 
subjects related to, 269; 
balance of trade, 325; 


Comptroller’s report, 277; 
deposits of banks, 299; 
exports, 325; gold move¬ 
ments, 331; loans of banks, 
277; money, 269; surplus 
reserves, 288, 307; volume 
of trade, 325. 

Money, 269; as a barometer, 
22, 129, 269; chart of, dur¬ 
ing four great panics, opp. 
292; gross and net supply 
of, 271, 272, 275; effect on 
merchants of the supply, 
274; prices and the supply 
of, 351; general rules con¬ 
cerning, 276; foreign rates 
of, 243. 

New railroad construction, as 
a barometer4^0, 130, 236; 
in the panic of 1837, 236; 
in the panic of 1857, 237; 
general rules concerning, 
239. 

New securities listed, eco¬ 
nomic laws affecting, 376; 
general rules concerning, 
378. 

Panics: of 1837, 236; of 1857, 
237, opp. 140; of 1865,148; 
of 1869, 152; of 1873, 156, 
opp. 140, 238, 398; of 1884, 
170, 399; of 1890, 176; of 
1893, opp. 140, 179, 319, 
400; of 1903, 192, 256, 320; 
of 1907, opp. 140, 196, 254, 
347; of “ Black Friday,” 
152; “ Undigested Securi¬ 
ties,” 192; a cause, 320; 
chart of money rates dur¬ 
ing four panics, opp. 292; 
chart of stock market 
during four panics, opp. 
316; derived from unbridled 
expansion, 139, 414; fore¬ 
told by “ loans to re- 



INDEX 


sources,” 281; course of, 
140; relation of “ money 
in circulation ” to, 273, 
275; tables of bond prices, 
in 1884, 62; in 1893, 63; in 
1903, 64, 65; in 1907, 66; 
table of seven major panics 
with accompanying events, 
opp. 140. 

Periods of a business move¬ 
ment, 16, 27, 121, 123; 
rules of, 125, 229; foretold 
by fundamental statistics, 
18. 

Political factors, 406; as a 
barometer, 26, 131; list of, 
407; general rules concern¬ 
ing, 411. 

Quotations on the stock ex¬ 
change, 370; affected by 
“ transactions,” 373; gen¬ 
eral rules concerning, 375. 

Railroad earnings, 395; as a 
barometer, 25, 130; as 

affected in three depres¬ 
sions, 398; general rules 
concerning, 401. 

Real estate as a barometer, 
231, 235. 

Reorganizations, 68; tables of 
bond and stock prices as 
affected by, 70-75. 

Resources of banks, 280; re¬ 
lation to loans, 280; table 
of, opp. 280. 


Social conditions, 412; as a 
barometer, 131; general 
rules concerning, 419. 

Stock Exchange, quotations, 
370; list of ten dividend¬ 
paying stocks, 33; the 
“ Wall St. Journal’s ” list 
of forty stocks, 371; list of 
twenty bonds, 372; trans¬ 
actions, 373; new securi¬ 
ties, 376. 

Stock prices, as a barometer, 
24, 130; chart of prices 
since 1860, opp. 371; possi¬ 
bilities of profits from 
stocks, 53; examples in 
profits, 53, 55; quotations, 
370; table with annual high 
and low prices of leading 
stocks since 1860, 36; table 
of prices of ten stocks in 
1907 to 1922, 34; table 
showing effect of reorgani¬ 
zation on prices, 70-75. 

Surplus reserves, 288; general 
rules concerning, 292. 

Transactions on the stock ex¬ 
change, 373; general rules 
concerning, 375. 

“ Undigested Securities ” 
panic, 192. 

Volume of trade, 328. 

Wealth, as a barometer, 231; 
table of, 232. 

X-Y Line: discussion of, 133. 



Babson’s Reports 

ON 

“Fundamental Conditions” 


A Special Service to furnish Merchants, 
Manufacturers, Investors and Bankers up- 
to-date information on the subjects men¬ 
tioned in this book. 


(To avoid any misunderstanding we desire to state tha^tWs work ^d 
not originate with us, but was inaugurated years ago by some of the lead 
ing ba!nidngand mercantile firms of this country. The < 
through performing the work independently was so great that the smaller 
house! hesitated to assume the burden individually, ^st Smong 

the work in the common interest of all concerned, dividing the cost among 
the firms and individuals who subscribe and share the resulting advantages.) 


A. Statistical Tables and Charts 

In order that the client may have the figures with 
which this organization works and upon which its 
conclusions are based, we supply monthly figures 
on the principal subjects which are representative 
of the entire country, such as Check Transactions, 
Railroad Earnings, Exports, Imports, Gold Produc¬ 
tion, New Building, Commodity Prices, etc. It 
should be especially noted that each issue of this 
Statistical Sheet contains not only the latest figures, 
but previous figures as well, thus obviating the 
necessity of posting, filing, or any clerical work 
whatever. The old sheet is simply destroyed 
upon receipt of the new. 



IMPORTANT ADDENDA 


The Statistical Tables and Charts are the 
foundation of our service and contain impar¬ 
tial, reliable and up-to-date figures on the 
subjects discussed at length in this book as 
the chief barometers of business. In order 
that the trend of these figures may at any time be 
detected at a glance, we have added graphic plots 
of them in red ink. It is believed that this combi¬ 
nation of statistics and charts laid before the client 
each month is of the utmost value, presenting, as 
it does, every factor in the current fundamental 
situation. 

B. Weekly Barometer Letter and Babson- 
chart 

The Weekly Barometer Letter and Babsonchart 
are issued every Tuesday, and summarize in a nut¬ 
shell the general situation actually existing in the 
Mercantile, Monetary and Investment worlds, as 
shown by the change in the figures on the Statisti¬ 
cal Sheet. 

The Barometer Letter is in no way designed to 
replace original thought on the part of clients, 
and should not be regarded as a “ market letter ” 
in any sense. It is more in the nature of an engi¬ 
neering report, prepared solely in the interests of 
the client and affords him a helpful check and 
comparison when determining what course of ac¬ 
tion and policy is most profitable. In connection 
with the Barometer Letter, a summary index figure 
is also given which is a composite of the figures on 



BUSINESS BAROMETERS 


the Statistical Sheet, showing the changes in general 
business from week to week and month to month. 

The Babsonchart shows graphically the trend of 
this index figure during the past twenty years, 
brought up to date each week. It gives a bird’s-eye 
summary of the past, an exact record of the present, 
and the clearest possible indication of the future 
of business in the United States. By watching 
from month to month the movements of the Bab¬ 
sonchart, one can see at a glance the trend of gen¬ 
eral business, and also the tendency of commodity 
prices and security prices. The close relation 
which these latter subjects bear to general business 
conditions is clearly indicated by the Babsonchart. 

Our clientele may be generally divided into the 
following four groups: 

1. Merchants, manufacturers, and others engaged 
in industrial, commercial, and mercantile lines, 
including corporation directors. 

2. Individual investors, trustees, treasurers of 
endowed institutions, insurance companies, and 
other enterprises — apart from banks — in 
which investment has a leading part. 

3. Bankers and men of affairs. 

4. Those interested in the work in general; sta¬ 
tistical departments, universities, economists. 
As previously mentioned, the Statistical Sheet 

and Barometer Letter deal with general business 
conditions and are common to all our services, since 
it is absolutely necessary for every one, whether he 
be merchant, banker, or investor, to form his 


IMPORTANT ADDENDA 


policies in accordance with fundamental conditions. 
In order to help our clients more specifically, how¬ 
ever we have provided the following additional 
portions of our service, which take up various 
phases of the question in detail. 

1. Stock Market Bulletin (every two weeks) 

The Statistical Tables and Charts and Weekly 
Barometer Letter and Babsonchart give the client 
the basis for determining when to buy and when to 
sell securities in order to take advantage of the 
long swings of the stock market. Second only in 
importance to the knowledge of when to buy and 
when to sell, however, is the knowledge of how to 
handle funds at the buying and selling zones, and 
to make the service complete, the semi-monthly 
Stock Market Bulletin takes up this phase of the 
science of investment. Furthermore, while the 
Barometer Letter treats only of the long swings of 
the market, extending over a year or more, in a 
general way, the Stock Market Bulletin goes into 
more detail. Each issue contains a review of the 
general situation and usually an analysis of some 
specific group of securities. 

Neither the Stock Market Bulletin nor the Ba¬ 
rometer Letter, however, will help the day to day 
trader, for nobody can tell what a particular security 
will do, but when used in connection with the rest 
of the service, this department fills the needs of the 
conservative purchaser who desires all the profit 
that is consistent with safety. 



BUSINESS BAROMETERS 


The real value of this Service, however, 
is found in the fact that it is prepared solely 
and exclusively from the standpoint of the 
client. We neither buy nor sell securities, in 
any way, shape, or manner, nor have we any 
connections whatsoever, direct or indirect, 
which influence our judgment. Clients thus 
secure for themselves strictly professional 
work of the highest character, which if paid 
for individually would be beyond the means 
of any but the most wealthy. 

2. Investment Bulletin (every two weeks) 


The natural desire of all is to invest with a mini¬ 
mum of risk, at the same time receiving as high an 
income as possible. There is no such thing as 
permanent absolute safety. The conditions under¬ 
lying investments may be absolutely clear at the 
time of purchase, but financial conditions shift con¬ 
stantly. An example may be found in the condi¬ 
tions that developed among our street railways in 
recent years. These securities were prime invest¬ 
ments less than a decade ago. 

It is naturally impossible for any investor to 
maintain sources of information that are sufficient 
to keep him thoroughly acquainted with changing 
conditions. This, however, is our business. 

In order to do this we cover the entire investment 
field from the standpoint of the man who has 
capital ready to invest to that of the man whose 
capital is all tied up in investments. On the first 



IMPORTANT ADDENDA 


and second pages of the Bulletin, for example, the 
present and prospective conditions of the invest¬ 
ment market are discussed, and all instances where 
investment securities are selling above or below 
their true value are pointed out. Securities, under¬ 
lying conditions of which are showing an adverse 
tendency, are discussed adversely and switches 
recommended into securities giving at least as good 
a return with a higher degree of security. 

The third page is devoted to thorough analyses 
of those properties and securities which we specially 
commend as the result of exhaustive study by our 
experts. 

From the above it can be seen that it is our 
purpose to discuss the investment field from 
all angles, from the standpoint of the most 
discriminating bankers and trustees, as well 
as the standpoint of business men desiring a 
maximum yield. 


3. Buyers’ Bulletin (every two weeks) 

A most essential factor is the price of various 
commodities and their relation to the general busi¬ 
ness situation. The Buyers’ Bulletin supplies this 
information every two weeks and covers all the 
leading commodities completely and specifically, 
showing the present condition and price trend of 
each, and stating the situation from the buyers’ 
viewpoint. From the very nature of the work, 



BUSINESS BAROMETERS 


the Buyers’ Bulletin must be specific, and is 
invaluable to every buyer no matter how large 
or small the quantity purchased. 

Prices on over 1000 individual commodities are 
studied by this department. Over 100 of the most 
important are covered in each issue of the Buyers’ 
Bulletin. Others are discussed as changes occur 
in their fundamental positions. 

4. Sellers’ Bulletin (every two weeks) and 
Sales Map 

It is the business of this department to study 
and forecast sales conditions in every sales terri¬ 
tory in the United States and Canada. 

A detailed forecast on individual states and 
provinces appears in every issue of the Bulletin. 
A list of over 100 localities appears each month 
together with a percentage forecast figure which 
enables you to figure sales in that locality sixty 
days in advance. 

The accurate reports are invaluable to sales and 
advertising executives in setting quotas, charting 
sales and in selecting the most fertile fields for 
additional sales effort. 

Credit executives also follow them closely and 
govern policies largely by these forecasts. If the 
figures show increasing business for a territory 
credit may be extended without great risk. If, 
however, the trend shows a falling off, collections 
should be made at once before the local “ hard 
times ” set in. 




IMPORTANT ADDENDA 


Buyers, finance officers and employment man¬ 
agers of many large retail stores study the fore¬ 
casts for their own city that they may base their 
plans on an accurate estimate of business as it 
will^be instead of on a blind guess. 

The Sales Map 

Each month a three colored map, 13 x 23 inches, 
showing conditions in the United States and 
Canada. Territories colored yellow show the best 
business, green sections run about average, while 
the areas in blue are poor fields for sales'effort. 

A picture of conditions that tells its story at a 
glance. 


5. Industries Bulletin (every two weeks) 

The Industries Department analyzes business 
conditions in specific industries. 

Production, demand, prices, wages, producing 
costs, sales, credit and probable profits are analyzed 
for every important industry. Statistics and earn¬ 
ings of principal companies in each field are also 
reported for the banker, investor, and man of 
affairs. 

Sales executives who must sell to given industries 
find these reports almost indispensable. 

Credit men, buyers, and employment executives 
also find them extremely helpful in forming a sound 
foundation for their plans. 



BUSINESS BAROMETERS 


Twenty-five basic industries are covered in de¬ 
tail. Over 100 lines of activity are reported on as 
changes occur. 

If you are interested in any given industry or 
industries, you will find the forecasts of this depart¬ 
ment as furnished in the Industries Bulletin very 
valuable. 

6. Special Bulletin (every two weeks) 

Feeling that the human factor is by far the most 
important in our business future the Special Bulle¬ 
tin treats of the fundamental social forces which 
must be carefully watched by those responsible for 
the management of business and investments. 

In a world torn by revolutionary changes in 
government and in men’s attitude toward govern¬ 
ment in industry and the workers’ attitude toward 
his employer; in business and the relation between 
producer and consumer; these great fundamental' 
laws that govern human behavior assume a most 
vital and important role. 

Twice a month the Special Bulletin will discuss 
the working of these laws in recent developments, 
aiding one to forecast their influence on both in¬ 
vestments and industry. 



IMPORTANT ADDENDA 


THE BABSON SERVICES 

For the convenience of clients these several 
bulletins have been grouped into the following 
Babson Services. 

BABSON’S REPORTS on Business 

for the merchant and manufacturer. A service that can be 
applied directly by the executive in business, consisting of: 

1. The Barometer Letter (Weekly). Supplemented by 

Statistical Tables and Charts (Monthly).* 

2. The Buyers’ Bulletin (every two weeks). 

3. The Sellers’ Bulletin (every two weeks). 

4. The Industries Bulletin (every two weeks). 

5. The Special Bulletin (every two weeks). 

This service covers the activity of the main divisions of 
any business. 

BABSON’S REPORTS for Bankers 

and Men of Affairs. Shorn of all detail it carries data on the 
great fundamental barometers of business that govern com¬ 
modity prices, determine security values and indicate the 
future trend of general business. 

1. The Barometer Letter (Weekly). Supplemented by 
Statistical Tables and Charts (Monthly).* 

2. The Industries Bulletin (every two weeks). 

3. The Special Bulletin (every two weeks). 

Maximum information at minimum expense of time and study 
for the busy man. 

BABSON’S REPORTS for Investors 

A service covering the handling of individual funds, both 
speculative and investment without the risk, worry or loss of 
time involved in ordinary speculation and investment. 

1. The Barometer Letter (Weekly). Supplemented by 

Statistical Tables and Charts (Monthly).* 

2. The Investment Bulletin (every two weeks). 

3. The Stock Market Bulletin (every two weeks). 

It affords the services of a corps of unbiased investment 
engineers in the selection of the proper securities for vour 
investment funds. 

♦Caimdian clients will receive the Canadian Statistical Tables and 





BOOKS BY ROGER W. BABSON 

BUSINESS BAROMETERS 

A book indicating the trend of business, containing a commercial and 
financial history of the United States from 1860 to date; the prices of 
leading commodities and stocks over a period of sixty years; and various 
tables on failures, clearings, crops, railroad earnings, exports, imports, 
commodity prices, and many other subjects which determine price move¬ 
ments. In addition Mr. Babson shows how great merchants, bankers, 
and investors use these figures for anticipating the trend of prices. 

Leather hound, flexible — Price, S3.00 

COMMERCIAL PAPER 

A practical study of commercial paper, and suitable as a text-book for 
colleges. Prepared in collaboration with Ralph May. Great attention 
has been given to making the book valuable both to the buyer and seller 
of commercial paper, showing the business man how to make his notes 
safe and attractive to banks, and showing the banker and investor how 
to select good paper. 

Leather hound, flexible — Price, $3.00 

MAKING GOOD IN BUSINESS 

Says Paul P. Harris, President Emeritus International Association of 
Rotary Clubs: “ I have the feeling of having a vigorous climb up a hillside 
with Mr. Babson. I say climb because I know that my feet have been all 
of the time on good solid ground. The air has been pure and exhilarating 
and the charms of the plain of everyday life below have been revealed to 
me as never before. He who reads MAKING GOOD IN BUSINESS 
will be refreshed and invigorated. He who adopts the formula for success 
therein contained, cannot fail.” 

Cloth hound — Price, $1.25 

BUSINESS FUNDAMENTALS 

This is one of the best sellers — more elementary than ‘‘Business 
Barometers ” but containing an explanation of all the principles outlined 
in that book. It is “ Business Barometers ” without the tables and the 
technical discussions. Those who are buying only one book of this list 
should purchase “ Business Fundamentals.” 

Cloth bound — Price $2.00 

THE FUTURE OF SOUTH AMERICA 

Especially authoritative and official, as Mr. Babson has had the co¬ 
operation of the leading government officials, in many cases the Presidents 
of the South American Republics. Copiously illustrated and contains 
special instructions for developing trade and making investments in South 
A men 

Cloth bound — Price, $2.50 

W. B. WILSON AND THE DEPARTMENT OF LABOR 

The story of “ Bill” Wilson — coal miner — despised striker — black¬ 
listed workman — and organizer and first Secretary of the first Depart¬ 
ment of Labor in the world — is intensely interesting. It gives vividly 
the human background of the whole labor movement and a description of 
the organization and policies of the Department of Labor. 

Red cloth bindinu — Price, $2.00 

ENDURING INVESTMENTS 

“ Curiously enough, the men today who have made a business or profes¬ 
sional success are the men who are questioning most vigorously whether 
they are making a success of their lives as sons, husbands, fathers and in 
the keeping up and extending of their personal friendships for the sake of 
the friendships themselves. 


“ These same successful business and professional men are the ones who 
often feel also that they have not solved the question of how to handle the 
appeals of good causes that come to them, at what age to retire, etc. 

“ Babson has been through the same experience — he has a lot of un¬ 
conventional, chummy things to say to these men.” 

Bound, in board — Price, $1.50 


FUNDAMENTALS OF PROSPERITY 

The following typical Chapter Titles speak for themselves in showing 
what this unique and interesting book covers: Honesty or Steel Doors; 
Faith the Searchlight of Business; Our Real Resources; Co-operation — 
Success by Helping the Other Fellow. 

Full cloth binding —- Price, SI.50 


NEW TASKS FOR OLD CHURCHES 
Suggestions for the solution of today’s problems, clear-cut and coura- 
geous.. Mr. Babson has little sympathy with the arguments of self-interest 
of business men or with the outworn methods of the church in industrial 
communities. His sole interest is in the physical, social, and spiritual 
salvation of the men, women, and children in our industrial centers. 

Here is a book of tremendous value in directing the attention of the men 
of the churches to the battle field which those interested in missionary 
activities are coming more and more to regard as their new frontier. 

Cloth bound — Price, SI .00 


RELIGION AND BUSINESS 

It discusses the relation of the Church to the Wage-Worker, the Em¬ 
ployer, to Pers<pnal Efficiency, and to Industry; Business Men and the 
Church; Training our Children in Religion; The Religion Which Will 
^rvive; The Interchurch Movement; Immediate Problems of the Church; 
and statistics on Religious Groups are some of the other vitally interesting 
chapters. The only book of its kind published. 

. Full cloth binding, deckle edge — Price, $2.75 


THE FUTURE OF THE CHURCHES 

e all, at times, wonder what is to be the future of the churches, and 
what we shall teach our children about them. In this little book the 
answer is given by one in sympathy with the churches, but in a business¬ 
like manner which appeals to those who seldom attend. 

Cloth binding, bold type — Price, SI.00 


THE FUTURE METHOD OF INVESTING MONEY 

This is said to be the frankest and briefest explanation of the “ inside ” 
ol the investment business ever published. An important chapter is de¬ 
voted to showing when to buy. 

Library binding, bold type — Price, 65 cents 


THE FUTURE OF US BOYS 

This book shows why- our boys are so inefficient and what must be done 
to correct this growing evil. It should be read by every employer, parent, 
snci teacner. 

Library binding, bold type — Price, 65 cents 


PUBLISHED BY 

BABSON PARK CO. 

WELLESLEY HILLS 
MASSACHUSETTS, U. S. A. 


THE BABSON INSTITUTE 

Twenty or thirty years ago the young man in business 
could train himself, the entire country then being in a de¬ 
velopment stage. Today with double the producing 
capacity in our manufacturing establishments the urgent 
problem of distribution requires that the young man 
assume responsibility in ten or fifteen years instead of 
twenty-five or thirty years. 

Anticipating these new conditions the Babson Institute, 
organized and operated by trustees under the educational 
and charitable laws of the state, was founded to emphasize 
a few fundamental principles involved in Production, 
Finance, Distribution, and Management. The work 
covers these four branches of business and personal 
activity. 

1. Practical Economics and the Handling of Com¬ 

modities. 

2. Financial Management and the Care of Property. 

3. Business Psychology and the Influencing of Men. 

4. Personal Efficiency and the Control of One’s Self. 

THE THREE DIVISIONS 

The work of the Babson Institute now being developed 
on its new campus at Babson Park is carried on under the 
three following divisions: 

Division One is known as the Resident Division and comprises an in¬ 
tensive one to two years’ course at Babson Park. This course is designed 
for men who are likely to come into responsibility or property. No formal 
examinations are required, but men must be sufficiently mature and 
seriously interested. 

Division Two is for the executives and soon-to-be executives of a cor¬ 
poration or firm who wish additional training in the fundamentals of 
Finance, Economics and Psychology, but who are unable to come to Bab¬ 
son Park for personal work. Departmental executives may take these 
Extension Courses while the owner’s son or successor is taking the resident 
work at Babson Park. 

Division Three offers in elementary form to the majority of the em¬ 
ployes of a plant the same principles that are taught the Resident men and 
the Extension Division men. Even when the owner of the plant and his 
executives have the correct point of view they themselves are ineffective 
unless a majority of the employes also look at things sanely. 

For the average firm which selects one man for the 
Resident Division, five department heads for the Exten¬ 
sion Division and 250 employes, the cost is $3,000. 

For further particulars address Department B B 

BABSON INSTITUTE 
BABSON PARK, MASS. 


Of Importance 
To Security Salesmen 


How much would it be worth to you to be sure 
of never losing a sale through that greatest cause of 
lost sales — lack of preparation? 

To impress your prospect — to create in him 
enthusiasm in your securities — to make him BUY 
— you must know security selling and know it 
well; better than your competitors do. 

Avoid Lost Sales 

The Babson Course oh Investments and Security 
Selling gives the knowledge seldom obtained 
through experience alone, and will reduce Lost Sales 
to a minimum. 

We have trained Security Salesmen for ten years 
and in its present form this Course is (in the words 
of many students) “ absolutely the best form of 
concentrated instruction on the subject of selling 
securities.” 

Be sure to get our booklet BB, “ Security Sales¬ 
manship— the Profession.” There is no obliga¬ 
tion. 


BABSON INSTITUTE 

BABSON PARK, MASS. 









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